Upward trend on the yield curve continues for a second consecutive week
Monday, 25 August 2014 00:00
Following the outcome of the monetary policy announcement for the month of August at where policy rates were held steady for a seventh consecutive month, the overall yield curve witnessed a parallel shift upwards for a second consecutive week on the back of selling interest coupled with profit taking.
Activity moderated during the week ending 22 August and mainly surrounded the liquid maturities of 15 May 2017, the two 2018s (i.e. 1 April 2018 and 15 August 2018), the 1 July 2019 and the 1 July 2022 as its yields were seen increasing significantly by 80 basis points (bp), 45 bp, 48 bp, 57 bp and 40 bp points respectively to a weekly high of 7.60%, 7.60%, 7.70%, 7.82%, and 8.60% against its previous week’s closing levels of 6.75/85, 7.12/18, 7.18/25, 7.20/30 and 8.17/22.
In addition, a limited amount of activity was witnessed on the 1 April 2016 maturity within the range of 6.80% to 7.20% while the 01.05.2021 maturity was seen changing hands within the range of 8.10% to 8.40% during the week as well.
Meanwhile in secondary bill markets, November 2014 maturities were seen changing hands of within the range of 6.35% to 6.45%, June 2015 within the range of 6.40% to 6.45% and July 2015 within the range of 6.40% to 6.50%. This was despite weighted averages at the weekly Treasury bill auction declining further for a 48th consecutive week to remain below te Central Bank’s Standing Deposit Facility Rate (SDFR) of 6.50%.
Meanwhile in money markets, overnight call money and repo rates remained steady throughout the week to average 6.70% and 6.54% respectively as average surplus liquidity increased to Rs. 37.74 billion against its previous week’s average of 27.39 billion. The OMO department was seen mopping up an amount of Rs. 38 billion via three term repo auctions at yields of 6.50% for 35 days and 6.51% each for 56 days and 77 days, valued Friday.
Rupee dips marginally during the week
The rupee was seen dipping marginally during the week to close the week at Rs. 130.18/20 against its previous weeks closing of Rs. 130.16/18 on the back of net foreign selling at the Colombo Bourse. The daily average USD/LKR traded volume for the first four days of the week ending 22 August was at $ 65.66 million. Given are the closing forward dollar rates that prevailed in the market: one month – 130.57; three months – 131.19; six months – 132.17.