3-year T-bond yield hits 14% for first time in 3 months

In secondary bond markets, the three-year bond yield moved up to 14% yesterday for the first time in three months, amidst moderate volume, reflecting an increase of five basis points in comparison to its previous day’s closing yields, Wealth Trust Securities said.

In addition a small volume of the 18¼ month bond was transacted at 13.80% as overall activity remained rather moderate.

“Expectations for rates to increase further in the coming weeks mainly at the weekly Treasury bill auctions coupled with the possibility of liquidity  remaining at a net deficit  was seen as the reasons behind the increase in yields according to market sources,” debt market specialist Wealth Trust said.

In money markets, liquidity moved into a net deficit once again yesterday of Rs. 0.66 billion. An amount of Rs. 0.98 billion was borrowed by market participants at Central Bank’s discount window rate of 9.75% while an amount of Rs. 0.32 billion was invested at its Repo window rate of 7.75%.  

“However overnight call money and repo rates remained steady to average 10.55% and 9.62% respectively as Central Bank avoided conducting any Open Market Operations (OMO) for a second consecutive day,” Wealth Trust said.

The rupee edged lower marginally to Rs. 132.41 in morning trading yesterday due to demand for contracts value cash (7/9/12) as the day difference for contacts value spot (11/9/12) against contacts value cash was four days. However selling pressure at these levels saw the rupee gain its lost ground once again towards the latter part of the day to close the week at Rs. 132.35.