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T-Bill yields rise for second consecutive week

Ceylon Today | 23 Aug 2019

By First Capital Research

Weekly yield movement & Volume

During the week, secondary market witnessed selling interest from both local and foreign counter parties, except on Tuesday (20), which saw buying interest across the board. Moreover, on 21 Wednesday, prior to the bill auction, market witnessed buying interest in certain maturities, resulting in yields reaching intraday lows.

However, subsequent to the bill auction outcome, the market witnessed selling interest leading to downward movement in yields while closing at their intraday highs.

At the weekly primary bill auction, weighted average yields were seen increasing across the board compared to the last week. The three-month bill was accepted at a weighted average of 7.84 per cent, while the six-month was accepted at 7.89 per cent after a lapse of one week. Furthermore, the market favourite one-year bill increased by 14bps to be accepted at a weighted average of 8.31 per cent.

During the week, short-term maturities fell by 10-35bps, and mid tenors came down by 1-8bps, while on the long end of the curve, yields dipped by 5-10bps amidst the overall market witnessing moderate volumes.

Liquidity & CBSL Holdings

Market liquidity continued to remain positive throughout the week to close at LKR 22.5Bn. CBSL holdings declined towards the end of the week to record at LKR 82.9Bn relative to LKR 106.1Bn held at the beginning of the week.

Foreign Interest

Foreign holding in Government Securities remained almost stable at LKR 136.5Bn levels while foreign holding percentage also maintained at 2.5 per cent.

Maturities for next week

The Government Security Market needs to settle a treasury bill maturity amounting to LKR 12.2Bn and a coupon payment of LKR 22.7Bn during the week ending 30 August 2019.

Daily Summary

Thursday (15.08.19): In the secondary bond market, yield curve shifted upwards amidst the selling interest from both local and foreign counterparties while the overall market witnessed moderate volumes. Foreign selling was mainly centred on [01.08.21], [15.05.23], [15.12.23] and [15.06.24] maturities with its yields trading at 8.73 per cent, 9.58-9.60 per cent, 9.70-9.75 per cent and 9.82-9.91 per cent respectively. Moreover, in the long end of the curve, [15.01.27] saw its yields trading between 10.05-10.10 per cent.

Friday (16.08.19): Secondary market yield curve edged slightly upwards with both local and foreign selling on selected maturities, while the overall market witnessed moderate volumes. Foreign selling was seen on the short end of the yield curve, with [01.05.21], [01.08.21], [15.10.21] and [15.12.21] trading at the day’s high of 8.75 per cent, 8.78 per cent, 8.95 per cent and 8.90 per cent, respectively. Both local and foreign selling was seen on [15.03.23] and [15.07.23] both at 9.70 per cent, [15.12.23] at 9.75 per cent and [15.06.24] at 9.95 per cent. In addition, selling interest was seen on long tenure maturities, with [01.08.26] at 10.00-10.06 per cent levels, while [15.01.27] changed hands at 10.05-10.15 per cent levels.

Monday (19.08.19): The secondary bond market witnessed continuous foreign selling interest, resulting in the overall yield curve shifting upwards amidst the market witnessing high volumes. With selling interest, short tenor [01.05.21] and [01.08.21] both reached an intra-day high of 9.15 per cent, while [15.12.21] saw its yields increasing to a day’s high of 9.20 per cent.

Tuesday (20.08.19): Reversing the selling interest witnessed the secondary market yield curve saw buying interest across the board while overall market witnessed moderate volumes ahead of weekly T-bill auction.

On the short end of the yield curve buying interest was seen on [01.05.21], [01.08.21] and [15.10.21] trading at 9.02 per cent, 9.00 per cent and 9.10 per cent, respectively. Mixed activity was seen on [01.07.22] changing hands at 9.45-9.30 per cent levels with foreign selling and local buying. Buying interest was also seen on the three 2023 maturities, [15.03.23], [15.07.23] and [15.12.23], trading at day’s low of 9.65 per cent, 9.69 per cent and 9.80 per cent, respectively; in addition, [15.03.24] and [15.06.24] traded at 10.02-9.90 per cent levels.

Wednesday (21.08.19): Prior to the bill auction, the secondary bond market witnessed buying interest resulting in short tenor maturities [01.05.21], [01.08.21] and [15.12.21] reaching intraday lows of 8.85 per cent, 8.90 per cent and 8.95 per cent, respectively. Furthermore, amidst buying, mid tenor [01.07.22] traded at 9.25 per cent, [15.07.23] at 9.60 per cent and both [15.03.24] and [15.06.24] at 9.90 per cent.

However, subsequent to the weekly bill auction outcome, where the one-year bill was seen further increasing by 14bps to 8.31 per cent from 8.17 per cent, the secondary market witnessed selling interest resulting in yields of [01.05.21] reaching 8.95 per cent, while [15.07.23] traded at 9.70-9.75 per cent levels.

Accordingly, the overall yield curve at the end of the day remained broadly unchanged, with the market witnessing low activity levels with thin volumes.