Secondary Bond Market activity increases as inflation drops

By Wealth Trust Securities
Point-to-Point Inflation for October decreased to a five-year low of 1.6% from 3.5% recorded in September while the annual average decreased to a low of 3.8% against its September figure of 4.2%.
In line with the outcome of inflation which was expected, secondary market bond yields decreased marginally during the week on the back of fresh buying interest to close the week lower than its previous week’s closing levels backed by increased activity.
The majority of the trades were made up of the two liquid maturities 01.07.2022 and 01.01.2024, as they closed the week at levels of 7.75/80 and 7.85/95, against its previous weeks closing levels of 7.77/80 and 8.05/10. The weekly highs of the said maturities were 8.05% and 8.20% and lows 7.70% and 8.80% respectively.
The 1 April 2018 maturity too was actively traded as it closed the week at 7.00/05 against its previous weeks closing of 7.00/10, with weekly highs of 7.15% and a low of 6.95%.
Furthermore, the late 2015 maturities, 2017 maturities and 2029 maturities were seen changing hands within the range of 6.05% to 6.15%, 6.75% to 6.95% and 8.65% to 8.85% respectively.
Meanwhile, in the secondary bill market, October 2014 maturities were quoted at levels of 5.90% to 6.00% as the weighted average of the 364 day bill remained steady at 6.00% for a third consecutive week at the primary auction.
In money markets, overnight call money and repo rates remained steady to average 6.00% and 5.51% during the week as surplus liquidity in the market averaged Rs. 21.64 billion. The Open Market Operations (OMO) Department of the Central Bank was seen mopping up liquidity during the week by way of overnight to seventy seven days term repo auctions at weighted averages ranging from 5.59% to 5.97%.
Rupee closes the week steadily
The dollar rupee rate on spot next contracts lost ground during the early part of the week to a low of Rs.131.10 on the back of importer demand.
However it gained most of its lost ground during the latter part of the week to close the week at 130.90/00 due to selling interest at levels of Rs. 131.00.
The daily average USD/LKR traded volume for the first four days of the week was US $ 42.89 million.
Some of the forward dollar rates that prevailed in the market were 1 Month – 131.33; 3 Months – 132.25 and 6 Months -133.33.

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