Mixed outcome at weekly auction keeps bond markets stagnant

Wednesday, 30 April 2014 00:00 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities A combination of mixed signals at the weekly Treasury bill auction held yesterday saw activity in secondary bond markets come to a standstill as yields were seen remaining steady.

Active two way quotes were seen mainly on the liquid two 2018 maturities (i.e. 1 April 2018 and 15 August 2018) and the 1 July 2019 maturity at levels of 8.71/74, 8.84/86 and 9.08/12 respectively with very minor volumes changing hands at levels of 8.72% to 8.74%, 8.85% and 9.10%. In addition, limited amounts on the 2017 maturities were seen changing hands within the range of 8.20% to 8.22% followed by the 1 November 2015 maturity at 7.30%.

At the auction, the total accepted amount fell 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. The weighted average on the 182 day maturity dipped by one basis point (bp) to 6.78% while the WAvg on the 364 day maturity remained unchanged at 7.02% as it represented 65% of the total accepted amount of Rs. 11.39 billion. In secondary bill markets, durations centering the 91 day maturity were seen changing hands within the range of 6.64% to 6.68%, October 2014 within 6.75% to 6.82% while the latest 364 day maturity was quoted at 6.98/01. In money markets, surplus liquidity stood at Rs. 12.07 b yesterday as overnight call money and Repo rates remained steady to average 6.95% and 6.52% respectively. Rupee steady for a third consecutive day The rupee remained steady for a third consecutive day to close the day at Rs. 130.60/62 yesterday. The total USD/LKR traded volume for the previous day (28 April) stood at $ 67.35 million. Some of the forward dollar rates that prevailed in the market were: one month – 131.14; three months -132.22; and six months – 133.77.

Rupee weaker on importer dollar demand

Reuters: The rupee ended a tad weaker on Tuesday due to importer dollar demand, while dealers expect the currency to remain stable in the near term in the absence of a pick-up in private sector credit. The spot rupee ended at 130.61/63 per dollar, compared with Monday’s close of 130.59/61. “A State bank bought dollars, to meet its importer (dollar) demand, possibly to cover oil bills,” said a currency dealer. Lower credit demand from the private sector even though key interest rates have been at multi-year lows since January, has surprised dealers. At an auction on Tuesday, the Central Bank rejected all bids for the benchmark 91-day Treasury bills with yields already at their lowest since January 2007, data showed. Last week, the Central Bank kept policy rates steady at multi-year lows. Private sector credit grew 4.4% year-on-year in February, the slowest since May 2010, latest data from the Central Bank showed. That compared with growth of 5.2% in January this year and 13.3% in February 2013. The Central Bank, in its monetary policy statement last week, expressed confidence that private sector credit growth would rebound in the second quarter and push up the pace of economic expansion. Dealers expect the rupee to trade in a range of 130.60-70 in the near future until credit growth picks up. It has been hovering between 130.55 and 130.70 since 3 March, Thomson Reuters data showed, with the Central Bank intervening to smoothen any sharp volatility.

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