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Weekly Govt Securities Market: Volatile yields amidst policy announcement

By First Capital Research
Weekly Yield Movement & Volume
The secondary market yield curve remained broadly unchanged, although there was an upward shift in mid tenor maturities amidst selling interest as a result of profit-taking. Activities were mainly centred on 2021, 2024, and 2027 maturities. On 27 Wednesday’s after-hours of the secondary market, the Cabinet announced number of tax reliefs to both individuals and corporates with the intention of providing a boost to the economy.
At the weekly bill auction held on Friday (29) both six-month and one-year bills increased by 9bps and 7bps to 7.67 per cent and 8.29 per cent, respectively, while the three-month bill dipped by 2bps to 7.45 per cent.In the forex market, the rupee depreciated to close the week at Rs 180.9 from Rs 179.99 held at the beginning of the week.


Liquidity & CBSL Holdings

Volatility in liquidity was witnessed, although it remained positive during the week. The highest excess liquidity for the week was recorded on 27 November, amounting to Rs 39.1 billion. Meanwhile, CBSL holdings slightly declined to close at Rs 77.8 billion.
Foreign InterestForeign holding in Government Securities remain unchanged to record at Rs 116.5 billion, while foreign holding percentage remained unchanged at 2.1 per cent.
Maturities for next week
The Government Security Market has to settle a Treasury Bill maturity amounting to Rs 23.4 billion during the week ending 6 December 2019.
Daily Summary
Thursday (21.11.19): The secondary market yield curve shifted slightly upwards with profit taking, while the overall market witnessed limited activity amidst moderate volumes. Short tenor [01.05.21], [01.08.21] and [15.12.21] traded in the range of 8.50-8.60 per cent levels, while 2023 maturities ([15.03.23], [15.05.23] and [15.07.23]) traded at 9.05-9.25 per cent levels. In addition, [15.06.24] traded at 9.43-9.50 per cent levels and long tenor maturity [15.10.27] traded at 9.80-9.82 per cent levels.
Friday (22.11.19): The secondary market yield curve witnessed an upward shift in the short and long end of the yield curve, while the overall market witnessed low volumes. With selling interest, short tenors [01.05.21], [15.10.21] and [15.12.21] saw yields reaching intra-day highs of 8.55 per cent, 8.70 per cent and 8.75 per cent, respectively. In the belly end of the yield curve, amidst mixed activities, [15.05.23] and [15.07.23] saw yields trading in the range of 9.15-9.18 per cent, while [15.06.24] and [15.09.24] traded in the range of 9.50-9.55 per cent. Long tenor, [15.01.27] and [15.10.27] traded in the range of 9.82-9.90 per cent, led by selling interest.
Monday (25.11.19): The secondary market yield curve witnessed an upward shift in the mid and long end of the yield curve, while overall market witnessed low volumes. With the selling interest, mid tenors [01.09.23] and [15.12.23] traded at 9.35 per cent and 9.45 per cent, respectively, while [15.03.24], [15.06.24] and [15.09.24] saw yields trading in the range of 9.50-9.62 per cent. Moreover, [15.01.27], [15.06.27] and [15.10.27] traded between 9.85-10.00 per cent.
Tuesday (26.11.19): The secondary bond market yields continued the upward sentiment in mid and long tenor maturities amidst selling interest, while the overall market witnessed moderate volumes. In the belly end of the yield curve, [15.03.24] traded at 9.70 per cent, [15.06.24] between 9.60-9.70 per cent and [15.09.24] traded in the range of 9.64-9.75 per cent. Moreover, [15.01.27] traded at 10.10 per cent, while [15.06.27] saw its yields trading between 10.10-10.15 per cent. [15.10.27] traded at 10.00-10.05 per cent. In the long end of the yield curve [15.03.28] maturity traded between 10.10-10.20 per cent.
Wednesday (27.11.19): In the morning hours, selling interest in the short end of the yield curve saw [01.05.21] at 8.65 per cent. In the belly end of the yield curve, [15.07.23] and [15.06.24] traded at 9.35 per cent and 9.75, respectively. Long tenor, [01.08.26] and [15.10.27] traded in the range of 10.0-10.10 per cent led by selling interest.

Meanwhile, at the weekly bill auction, both six-month and one-year bills increased by 9bps and 7bps to 7.67 per cent and 8.29 per cent, respectively, while the three-month bill dipped by 2bps to 7.45 per cent. With buying interest, [15.06.24] and [01.08.26] yields dipped to 9.70 per cent and 9.95 per cent, respectively, during the latter part of the day. During after-hours of the secondary market, the Cabinet had announced a number of tax reliefs to both individual and corporates.