By First Capital Research
Weekly Yield Movement & Volume
Amidst the presidential election outcome, the secondary market yield curve shifted downwards across the board on the back of heavy buying interest stemming from both local and foreign counterparts.
Prior to the Presidential election, the yield curve remained broadly unchanged, as market participants remained on the sideline for a clear outcome. Activities were mainly centered on 2021, 2022, 2023, 2024, and 2034 maturities. Post-election, short tenure maturities dipped by 30-45bps, mid tenors fell by 58-71bps, and long tenors shifted downwards by 38-59bps.
At the weekly primary bill auction, three-month and six-month bill yields were accepted at weighted averages of 7.47 per cent and 7.58 per cent, with both dipping by 9bps. The benchmark one-year dipped for the first time in four weeks to be accepted at a weighted average of 8.22 per cent.
In the forex market, the rupee appreciated to close the week at Rs 179.29 from Rs 180.40 held at the beginning of the week.
Liquidity & CBSL Holdings
Volatility in the liquidity was witnessed although it remained positive during the week. The highest excess liquidity for the week was recorded on 20 November amounting to Rs 12.7 billion. Meanwhile, CBSL holdings slightly declined to close at Rs 80.1 billion.
Foreign holding in Government Securities increased by Rs 2.2 billion to record at Rs 116.5 billion, while foreign holding percentage remained unchanged at 2.1 per cent.
Maturities for next week
The Government Securities Market has to settle a Treasury bill maturity amounting to Rs 25 billion, and Treasury bond interest of Rs 19.1 billion during the week ending 29 November 2019.
Thursday (14.11.19): The secondary market yield curve remained broadly unchanged, while the overall market witnessed thin volumes as investors followed a wait-and-see approach ahead of the Presidential Election. In the belly end of the yield curve, [15.09.24] traded at 10.07 per cent, while [15.10.27] saw its yield ranging between 10.31-10.32 per cent. With the buying interest, long tenor [15.09.34] changed hands at 10.72-10.70 per cent. Meanwhile, at the bond buy back held under open market operations, a total of Rs 3.0 billion was accepted with [15.03.22], [01.07.22] and [01.10.22] being accepted at weighted averages of 9.02 per cent, 9.12 per cent and 9.20 per cent.
Friday (15.11.19): The secondary market yield curve remained unchanged, while the overall market witnessed thin volumes ahead of the Presidential Election. Limited activity was seen on [15.09.24] trading at 10.07-10.05 per cent levels and [15.10.27] trading at 10.33-10.35 per cent levels.
Monday (18.11.19): With the outcome of the Presidential Election, the secondary bond market experienced a bullish sentiment, with heavy buying interest across the board resulting in the yield curve shifting downwards.
With the buying interest, in the short end of the yield curve, the one-year T bill reached 8.50 per cent, while [15.12.21] reached 8.69 per cent. Moreover, [15.03.23], [15.07.23] and [15.12.23] reached intra-day lows of 9.35 per cent, 9.50 per cent and 9.55 per cent, respectively. In the midst of heavy volumes, [15.03.24], [15.06.24] and [15.09.24] saw yields trading at intra-day lows of 9.80 per cent, 9.77 per cent and 9.80 per cent, while [15.10.27] reached the day’s low of 10.08 per cent.
Tuesday (19.11.19): In the secondary market, the positive sentiment continued for the second consecutive day after Presidential Election results, with heavy buying interest witnessed across the yield curve from both local and foreign counterparties with high volumes. The yield curve shifted downwards across the board, while the benchmark one-year was seen trading at day’s low of 8.30 per cent.