The weighted average yield fetched for the 2019 tenure at the auction was 8.15%, almost in tandem with the yield it fetched prior to the auction. The Central Bank (CB), previously, had a total of Rs 10 billion T Bonds for sale at yesterday's auction, ieRs five billion each of 2019 and 2021 maturities respectively. It however rejected bids received for the 2021 maturity.
Globally, due to a liquidity crunch and inflationary expectations, there has been a sell-off of bonds, as a result of which 10 year Japanese Government bonds saw its yield rise by six basis points (bps) to 0.450% yesterday, 10 year US Treasuries, up, eight bps to 2.22% on Monday and 10 year German Government bonds, up by 50 bps after hitting record lows only last month (April).
However, such sell-offs globally, have thus far left the local market unscathed, sources told Ceylon FT.
With leeway for banks till Friday to meet CB's 6% statutory reserves ratio (SRR) requirement, banks continued to empty part of such reserves holdings to the market for the second day running yesterday, resulting in excess liquidity increasing by 0.8% to Rs 120.5 billion yesterday. An allowance of going below, up to 10% of the SRR target, is given by CB to banks till Friday. Those were the reasons for the uplift in excess liquidity yesterday and on Monday and not due to inflows which have dried up.
The drying up of inflows is attributed to foreign investor uncertainty due to a transitionary government in power.
Meanwhile, the weighted average rates of call money and overnight market repo transactions fell by one basis point each to 6.11% and 6.03% respectively at yesterday's trading.
Courtesy: Ceylon Finance Today 13 May 2015