Secondary Bond market rallies; parallel shift down of yield curve

THE secondary Bond market delivered a strong performance last week, with yields trending lower amid a marked improvement in system liquidity and a corresponding decline in money market rates.

- By WEALTH TRUST SECURITIES

The positive momentum was sustained throughout, underpinned by steady, balance-sheet driven institutional demand.The overnight money market liquidity reached a six month high, exceeding Rs. 200 billion during the week and remained high throughout the week. The abundant liquidity environment translated into lower overnight call money and repo rates while the weekly T-Bill auction also witnessed a decline in rates, which helped anchor the short end of the yield curve, inducing a downward adjustment across the yield curve. Against this backdrop, Bond yields declined across key maturities, while market activity and transaction volumes remained consistently healthy.

Momentum strengthened further towards the latter part of the week, with aggressive buying pressure pushing yields lower. Market sentiment was additionally supported by policy-related optimism and positive external developments, reinforcing confidence in the prevailing rate environment and the medium-term outlook.

Overall, the week reflected a continued recovery in the secondary Bond market, driven by supportive liquidity conditions, easing rates, constructive policy signals, and a favourable external backdrop. As a result, the yield curve was observed registering a downward shift on a week-on-week basis.

In terms of the secondary Bond market trade summary: During the week, the 15.05.26 maturity traded down the range of 8.35%-8.30%. The 01.05.27 maturity traded within 8.95%-8.90% while the 15.09.27 maturity traded within 8.95 %—8.93%.