Secondary Bond market yields see-saw; Close down on robust recovery

Rs. 295 b mega Bond auction records bullish outcome despite under-subscription Foreign holdings in Rupee treasuries records net outflow for second consecutive week Money market liquidity increases Rupee appreciates considerably

- By WEALTHTRUST SECURITIES

THE Secondary Bond market witnessed significant volatility last week. Yields spiked sharply at the start of the week amid heightened risk aversion following reports that the US had bombed Iranian nuclear sites. This triggered widespread sell-offs in both the local bond and equity markets. Market sentiment worsened further as the Iranian Parliament threatened to close the Strait of Hormuz, a vital channel for global oil shipments, raising fears of broader market disruption.

However, a dramatic reversal began last Tuesday (24) after US President Donald Trump announced a ceasefire between Israel and Iran. The announcement sparked renewed buying interest and a strong recovery across both local and global markets. Despite ongoing uncertainty due to conflict-ing reports and ceasefire violations, investor sentiment improved, driving yields lower.

The recovery extended into Wednesday as the truce appeared to hold, boosting trading volumes and continuing the downward trend in yields. By Thursday, the market entered a consolidation phase, with yields mostly steady amid subdued activity as investors awaited the upcoming Treasury bond auction. Following a bullish outcome at the auction conducted on Friday, yields edged down further to close the week significantly lower on a week-on-week basis. Overall market activity and transaction volumes were at healthy levels for the week.