Throughout the week, the secondary market experienced a notable resurgence in buying interest, observed across the board. The renewed appetite for investment contributed to a decline in market yields, particularly on the short to mid-end of the curve.
The decrease in yields was driven by supply-side contractions, as no bond auctions were scheduled until September.
Market sentiment was bolstered by a significant drop in inflation, measured by the CCPI, which reached single digits for the first time in 20 months, standing at 6.3% in July 2023 compared to 12.0% in June 2023. This decline in inflation was attributed to a decrease in both Food and Non-Food inflation components.
At the short end of the curve, the maturities for 2026 and 2027 witnessed yield reductions of +70bps and +90bps, over the course of the week. At the mid-end of the curve, the maturities for 2028 and 2030 experienced yield decreases of +100bps over the week. These notable declines in yields presented favourable opportunities for investors seeking potential gains in the secondary market.
The CBSL conducted its weekly bill auction and accepted the total offered amount of Rs. 180.0 bn across all tenors.
Thus, 91-day maturity closed at a weighted average yield of 19.90% (-6 bps) while 182-day and 364-day maturities were trimmed down to 17.57% (-12bps) and 14.16% (-13bps).
In the Forex market, the Rupee further appreciated against the greenback with rupee being recorded at Rs. 324.6 compared to Rs. 329.4 recorded during the beginning of the week.
Courtesy: First Capital Research (August 2,2023)