By First Capital Research
Weekly Yield movement & Volume
The secondary market yield curve was seen once again recording a parallel shift downwards, on the back of heavy buying interest primarily centred on the short to mid tenor maturities. The shorter end of the curve witnessed a steep decline in the range of 7-15bps, while the benchmark 364-day bill was seen trading at an intraday low of 9.15 per cent. In the belly-end of the curve, maturities were seen dropping by 2-15bps, while the long tenors witnessed a dip in yields by 3bps.
At the primary bill auction held on 15 May, the three-month and six-month were accepted at a weighted average of 8.52 per cent and 8.88 per cent, respectively, while the benchmark one-year witnessed a steep dip by 26bps to record at 9.18 per cent following its previous week’s dip of 37bps. Post auction, on the back of buying interest one-year bill dipped further to close the day at 9.10 per cent.
Meanwhile, in the forex market, the rupee depreciated mid-week to Rs 176.74 from opening levels of Rs 174.90/10, thereafter, the rupee slightly appreciated to close the week at Rs 176.17.
Liquidity and CBSL Holdings
Market liquidity remained positive throughout the week to close the week at Rs 25.05 billion on the back of release of long-delayed payments by the Government. CBSL continued to drain out liquidity by way of repo auctions throughout the week at weighted averages ranging between 8.38 per cent and 8.59 per cent.
Foreign holding decreased by Rs 10.8 billion to record at Rs 143.7 billion. Foreign holding percentage dipped to 2.7 per cent from a previous level of 2.9 per cent.
Maturities for next Week
The Government Security Market has a Treasury bill maturity amounting to Rs 16.1 billion that needs to be settled week ending 24 May 2019.
Thursday (09.05.19): In the secondary market, shorter end of the yield curve witnessed a steep downward shift with heavy demand, while the overall market witnessed moderate volumes. The one-year bill also recorded a notable dip to close at 9.15 per cent. During the morning hours of trading there was a slight increase in yields mainly centred on [15.03.24] maturity which traded at 10.62 per cent in the midst of profit taking. However, towards the latter part of the day, with buying interest it was seen trading at intra day’s low of 10.52 per cent. Furthermore, following maturities traded at their intra-day lows as [01.07.19] traded at 8.60 per cent, [15.12.20] at 9.60 per cent, [15.03.22] at 10.00 per cent, [15.07.23] at 10.40 per cent and [01.09.23] at 10.42 per cent. In the long end of the curve, [01.05.29] changed hands at 10.95 per cent.
Friday (10.05.19): Continuing positive sentiment drives secondary market yield curve downwards across the board reinforced with net surplus liquidity in the system including term repo, recording a high of Rs 89.24 billion. Buying interest was witnessed on the following maturities trading at intraday lows with the one-year trading at 9.15 per cent with considerable volumes, while [01.05.20] traded at 9.13 per cent. Foreign buying was seen on the 2021 maturities with [01.08.21] trading at intraday lows of 9.75 per cent and [15.10.21] at 9.80 per cent. Local buying interest was seen on [15.03.22], [15.03.23], [15.07.23], [15.03.24] trading at day’s low of 9.95 per cent, 10.25 per cent, 10.30 per cent, 10.40 per cent, respectively. In addition, [15.01.27] traded at 10.72 per cent with considerable volumes, as [15.06.27] traded at 10.80 per cent, while overall market witnessed high volumes.
Monday (13.05.19): The secondary market yield curve remained mostly unchanged with mixed activities, while the overall market witnessed high volumes for the day. In the short end of the curve, [15.12.20] traded in the range of 9.75 per cent-9.85 per cent levels, [15.03.22] at 9.90 per cent and [15.03.23] at 10.30 per cent. Mid tenor [15.03.24] witnessed high volumes trading at 10.40-10.47 per cent levels, while on the back of foreign buying, [01.08.24] traded at 10.46 per cent. Furthermore, in the midst of buying interest, the following maturities were seen trading at their intra-day lows: [01.06.26] at 10.67 per cent, [01.08.26] at 10.65 per cent, [15.06.27] at 10.75 per cent. In the long end of the curve, [01.05.29] changed hands at 10.86 per cent.
Tuesday (14.05.19): With the prevailing tensed situation mixed activity was witnessed in the secondary market with a slight upward shift in the yield curve amidst high volumes. Selling pressure was witnessed during the early hours of trading on the following maturities trading at their intraday high with [01.03.21], [01.05.21], [01.08.21] and [15.12.21] trading at 9.85 per cent, 9.88 per cent, 9.92 per cent and 10.00 per cent, while [01.05.21], [01.08.21] and [15.12.21] traded at 9.85 per cent, 9.88 per cent, 9.92 per cent and 10.00 per cent, and [15.03.23] and [15.07.23] traded at day’s high of 10.50 per cent and 10.48 per cent, respectively, In addition, [15.01.27], [15.06.27], [01.05.29] all traded at 10.80 per cent, while [01.05.29] traded at 10.92 per cent. During the latter session of trading, foreign buying was seen primarily centred on [15.03.24] at 10.50 per cent, while the one-year T-bill traded at day’s high of 9.25 per cent.
Wednesday (15.05.19): Selected mid to long tenure maturities were seen reaching intraday low amidst the buying interest, with [15.03.23] reaching 10.35 per cent, foreign buying led [15.03.24] to the day’s lowest of 10.41 per cent and [15.01.27] traded at 10.73 per cent, while the overall yield curve shifted slightly downwards, with overall market witnessing moderate volumes. At the primary bill auction, yield of three-month crawled to 8.52 per cent, six-month yield dipped to 8.88 per cent and one-year yield dipped to 9.18 per cent, recording a near eight-month low since September 2018. Post auction, on the back of buying interest, the one-year bill dipped further to close the day at 9.10 per cent, while three short term 2021 maturities ([01.03.21], [01.08.21] and [15.10.21]) traded at 9.65 per cent, 9.75 per cent and 9.85 per cent, respectively.