Activity in secondary bond markets high on speculative demand

Thursday, 8 May 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities The speculation on the outcome of this month’s (May) monetary policy announcement saw secondary bond markets remaining bullish during morning hours of trading yesterday. Activity remained high as yields on the two 2018 maturities (i.e. 1 April 2018 and 15 August 2018) and 1 July 2019 maturity were seen dipping to daily lows of 8.53%, 8.65% and 8.97% respectively to reflect amalgamated dips of 20 basis points (bp), 21 bp and 11 bp respectively against their last week’s closing levels of 8.72/75, 8.83/88 and 9.07/10 closely followed by the 1 November 2019 and 1 May 2021 maturities dipping to daily lows of 9.03% and 9.68% respectively against their previous week’s closing levels of 9.12/18 and 9.85/94 respectively.

However, the outcome of yesterday’s weekly Treasury bill auction coupled with profit taking curtailed any further downward movement as yields were seen edging up once again to hit daily highs of 8.62%, 8.68%, 9.02%, 9.05% and 9.72% respectively and closed the day marginally higher in comparison to its previous day’s closing levels.

At yesterday’s weekly auction, the weighted average (WAvg) on the market favorite 364 day maturity remained unchanged for a third consecutive week at 7.02% while the WAvg on the 182 day bill continued to decline further by two basis points to record 6.76%. A total of Rs. 14.65 billion was accepted at the auction against its initial total offered amount of Rs. 10 b with the 364 day bill representing 84.6% of this volume. Meanwhile in money markets, overnight call money and repo rates increased marginally to average 6.96% and 6.56% respectively as surplus liquidity decreased further to Rs. 2.24 b yesterday. The total surplus amount was deposited at CBSL’s Standing Deposit Facility Rate (SDFR) of 6.50% as Central Bank continued to refrain from conducting any OMO auctions yesterday for a second consecutive day. Rupee gains marginally The USD/LKR rate appreciated marginally yesterday on the back of weakening importer demand to close the day at levels of Rs.130.58/60 as volume traded moderated. The total USD/LKR traded volume for the previous day (6 May 2014) stood at $ 55.15 million. Some of forward dollar rates that prevailed in the market were: one month – 131.11; three months – 132.12; and six months – 133.72.