Secondary market Treasury bond yields nosedive during the week

Saturday, 29 September 2012 04:01 - - {{hitsCtrl.values.hits}}

Secondary market Treasury bond yields plunged as much as 90 basis points in average across the yield curve during the week to levels last seen in April 2012.

In a bizarre decline in yields, the two years up to five year maturities were seen been traded below the shorter tenure 182 day Treasury bill weighted averages of 12.57% while the six-month maturity was seen been quoted below the 364 day weighted average of 13.02% reflecting an inverted yield curve, a phenomenal very rarely witnessed in Sri Lanka bond markets.

The three-year maturity was traded at a ld a sixth consecutive day. The improved macro-economic numbers coupled with cuts in budget expenditure in order to meet the budget deficit target of 6.2% of GDP were seen as the reasons behind this.

Secondary...

However the pace of the decline was considered negative according to market sources due to the ability to sustain such a short dip in such a short period.

Meanwhile, in money markets, liquidity concerns remained a dampener towards the bull run in bond markets as the week closed with a net deficit of Rs. 7.7 b. The Central Bank continued to inject liquidity into the system throughout the week through its Open Market Operations (OMO), which in turn helped keep overnight call money and repo rates steady to average 10.55% and 9.65% respectively for the week.

Rupee gains to a four month high of 129

In the forex market, the dollar rupee rate followed the same bull run in bond markets to appreciate to a four-month high of Rs. 129 during the week.

Dollar inflows in to the Colombo stock market coupled with lower importer demand were seen as the reasons behind this. Given are some forward dollar rates that prevailed in the market.

1 Month   -   130.63

3 Months   -   133.00

6 Months   -   136.33