Yield curve remains steady during the week as activity dries up
Monday, 5 May 2014 00:00
By Wealth Trust Securities
The yield curve remained broadly steady during the week ending 2 May as activity dried up considerably following mixed signals at the weekly Treasury bill auction and Inflation increasing for the first time in five months on its point-to-point basis during the month of April.
At the auction, the total accepted amount was below the total offered amount for the first time in four weeks while all bids for the 91 day maturity was rejected for the first time in 12 weeks as well. However the weighted average (WAvg) on the 182 day maturity dipped by one basis point (bp) to 6.78% whiles the WAvg on the 364 day maturity remained unchanged at 7.02%.
Meanwhile on inflation, the point-to-point was seen increasing to 4.90% from 4.20% while its annualised average dipped to 5.60% from 5.70% for the month of April.
The limited amount of activity that took place was mainly at the belly end of the yield curve centring the liquid two four year maturities (i.e. 1 April 2018 and 15 August 2018) and the five year maturities (i.e. 1 July 2019 and 1 November 2019) within the ranges of 8.72% to 8.75%, 8.84% to 8.86%, 9.07% to 9.11% and 9.16% to 9.20% respectively.
In addition, the shorter end of the curve witnessed some activity as well, with the 2015 maturities changing hands within the range of 7.15% to 7.33% and 2016 maturities within the range of 7.60% to 7.78% as well.
Meanwhile in money market, Overnight Call money and repo rates remained resilient at levels of 6.45% to 6.55% and 6.95% to 7.00% respectively during the week as liquidity remained at a healthy surplus to average 22.88 billion for the week.
Surplus liquidity was continuously drained out by way of repo auctions for durations ranging from overnight to 77 days at WAvgs of 6.53% to 6.78% by the Open Market Operations (OMO) department of Central Bank.
Rupee dips marginally during the week
The rupee lost ground marginally to close the week at levels of Rs. 130.62/65 on the back of import led demand and held steady at these levels as export conversions set in towards the latter part of the week. The daily average USD/LKR traded volume for the first three days of the week was at $ 69.47 million.
Some of the forward dollar rates that prevailed in the market were: one month – 131.16; three months – 132.24; and six months – 133.79.