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Sri Lanka bond yields fall ahead of monetary policy decision

ECONOMYNEXT- Sri Lanka’s rupee opened weaker at 181.45/50 to the US dollar in the spot market on Thursday, while gilt yields fell, and stocks gained, brokers and dealers said.

The rupee closed at 181.35/45 to the US dollar in the spot market on Tuesday.

In the secondary bond market, yields were seen falling as the market got ready for the monetary policy announcement on Friday, dealers said.

This will be the first monetary policy decision taken following the appointment of new Central Bank Governor W D Lakshman on Tuesday.

Senior Economic Advisor to the Finance Minister Nivard Cabral, who is also a former central bank governor, this week said there is scope for further policy rate cuts, to further stimulate an economy which is receiving widespread tax cuts.

Lakshman’s predecessor Indrajit Coomaraswamy placed lending rate caps to boost economic activity, saying real interest rates were too high.

The central bank has been injecting liquidity to the money market through reverse repo auctions as well, in the run up to the holiday season.

Banks meanwhile are grappling with a rise in bad loans, which had shown signs of slowing down, while the government has directed banks to stop collection of loans of below 300 million rupees, which may affect cash flows.

Dealers said market participants were highly active ahead of the monetary policy decision, especially on securities maturing after three years.

A bond maturing on 15.12.2021 was quoted at 8.50/70 percent at Thursday’s open, falling from 8.65/85 percent at Tuesday’s close.

A bond maturing on 15.07.2023 was quoted at 9.30/50 percent, falling from 9.40/50 percent.

A bond maturing on 15.09.2024 was quoted at 9.58/62 percent, down from 9.75/80 percent

A bond maturing on 15.10.2027 was quoted at 9.78/88 percent, falling from 9.95/10.05 percent.

A bond maturing on 15.05.2030 was quoted at 9.85/00 percent, down from 10.15/25 percent.

A bond maturing on 15.09.2034 was quoted at 10.00/25 percent, falling from 10.25/30 percent.

At the Colombo Stock Exchange, the main All Share Price Index (ASPI) was up 0.05 percent or 3.28 points to 6,056.40 in the first half hour of trading amid volatility.

The S&P SL20 Index of more liquid stocks were up 0.65 percent or 19.06 points to 2,967.51.

Market turnover was 14.9 million rupees, and 24 stocks were up while 14 were down.

Browns Investments was up 10 cents to 4.60 rupees a share, contributing most to the ASPI’s gain.

Dialog Axiata was up 10 cents to 12.50 rupees a share and Commercial Bank was up 1 rupee to 97 rupees a share, also contributing to the main index gain. (Colombo/Dec26/2019)

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