By First Capital Research
Weekly Yield movement and Volume
The secondary market yield curve remained relatively unchanged; however, towards the latter sessions of the week, the yield curve shifted slightly upwards due to selling pressure witnessed on the belly end of the curve. The USD/LKR ranged between Rs 177.60-178.50, on the back of continued foreign buying interest in Government Securities witnessed previous weeks. At the primary bill auction held on 13 February 2019, total offered amount was accepted in one-year bill at a weighted average yield of 10.72 per cent, increasing marginally by 3bps from previous week with both the three-month and six-month being rejected.
Liquidity and CBSL Holdings
CBSL market liquidity remained negative throughout the week, although recorded a significant improvement compared to the previous week by narrowing the negativity during the week. Highest liquidity deficit for the week was recorded on 7 February, amounting to Rs 103.8B. Meanwhile, CBSL holdings remained relatively stable at Rs 176.3B.
Foreign holding was recorded at Rs 162.6 billion, recording an increase of Rs 11.5 billion, while witnessing foreign buying in government securities for the third consecutive week. Foreign holding percentage for the week improved to 3.1 per cent.
Maturities for next week
Government securities market has a Treasury bill maturity amounting to Rs 21.7 billion, which needs to be settled on
22 February 2019.
Thursday (07.02.19): The secondary market yield curve continued to remain broadly steady while market witnessed moderate volumes. Selling interest was witnessed on short-tenure 2021 and mid-tenure 2027 maturities, with [01.08.21] trading at 10.95 per cent, [15.12.21] at 11.00 per cent and [15.01.27] at 11.30 per cent and [15.06.27] at 11.35 per cent, while mixed activities were witnessed on mid-tenure [15.12.23] at 10.97-11.03 per cent levels.
Friday (08.02.19): The secondary market yield curve continued to remain mostly unchanged on the back of limited activities with moderate volumes changing hands during the day. Selling interest was witnessed on short-tenure [01.08.21] and [15.12.21] around 11.00 per cent mainly from local and foreign counter parties while limited activities were witnessed on [15.06.27] at 11.37 per cent.
Monday (11.02.19): Secondary market activities dried up as the market was at a complete standstill with participants adopting a wait-and-see approach ahead of the primary bill auction to be held on [13.02.19], while yield curve continued to remain unchanged from last week’s closing levels. CBSL is offering Rs 21.0 billion at this week’s primary auction consisting of three-month, six-month and one-year bills.
Tuesday (12.02.19): Secondary market saw moderate volumes compared to yesterday’s standstill state, while the belly and long end of the yield curve experienced an upward shift amidst selling pressure stemmed from foreigners. Foreign selling predominantly centered on mid-tenure, [01.08.26] at 11.30-37 per cent and [15.06.27] at 11.37-40 per cent while the following maturities reached intraday high with two 2021 maturities ([01.08.21] and [15.12.21]) at 11.00 per cent and 11.02 per cent, [15.12.23] at 11.10 per cent, [15.03.25] at 11.30 per cent with foreign buying was witnessed on [15.12.23] at 11.05-11.10 per cent levels.
Wednesday (13.02.19): Belly-end of the yield curve shifted slightly upwards prior to the primary bill auction held on 13 February 2019 while secondary market witnessed low volumes.
At the primary bill auction, total offered amount was accepted in one-year bill at a weighted average yield of 10.72 per cent, increasing by a marginal 3bps from previous week with both six-month and three-month were being rejected. During the day, short-tenure two 2021 maturities ([01.08.21] and [15.12.21]) reached intraday high of 11.05 per cent and 11.00 per cent, while mid-tenure maturities [01.08.26] traded at day’s high of 11.40 per cent and [15.06.27] at 11.43 per cent.