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Foreign investors sell down more Sri Lanka bonds

ECONOMYNEXT – Foreign investors sold down 17 billion rupees of bonds (125 million dollars) in the week to August 05, 2015, official data showed, extending a trend seen since a rate cut in April and pressure on the country’s currency peg due to growing domestic credit.

Foreign investors have sold down 81 billion rupees (604 million dollars) of rupee bonds since the April rate cut.

Some foreign investors also sold out in the last quarter of 2014, but there was renewed buying in the first quarter of 2015.

The Central Bank has said it is cutting rates because inflation is low as if they are actually targeting a domestic monetary anchor when in practice they target the exchange (an external anchor).

Sri Lanka has also sold dollar bonds in the domestic market this year, but tenors have been shrinking after April.

The government also sold a 650 million dollar 10-year bond in June

The new administration has ratcheted up spending after January 2015 sending domestic borrowings soaring but has did not raise rates. Instead it released tens of billions of rupees of excess liquidity firing credit, consumption and imports and cut rates in April spooking bondholders. (Corrected Jan 2015)


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