Foreigners buy Sri Lanka rupee bonds before rate decision

ECONOMYNEXT- Foreign investors bought around 2.7 billions rupees of rupee denominated bonds in the week to July 10 ahead of the monetary policy decision on July 11, central bank data showed. 

Foreign holdings of rupee bonds rose to 144.83 billion rupees by July 10, from 142.16 billion rupees a week earlier.

The central bank held policy rates on July 11 but signalled a possible rate cut on August 23.

However, the de-facto target rate, the overnight repo rate at which liquidity is mopped up from money markets, has been rising over the past week.

Foreign investors sold rupee bonds heavily in the last quarter of 2018 as the central bank generated a liquidity shock to de-stabilize a peg with the US dollar and a political crisis in October undermined investor confidence.

Foreign investor holdings fell to 145 billion rupees by mid-January 2019 and climbed up to 167 billion rupees by March 27, according the central bank data.

Selling resumed in April and by May 08, foreign investor holdings were down to 143 billion rupees. There have been purchases and sales in alternate weeks since then.

A cut in the floor policy rate in May 30 has also not generated any large scale selling. (Colombo/Jul12/2019)

 
 

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