ECONOMYNEXT – Sri Lanka’s bond yields spiked Monday after a shock defeat for the ruling coalition and a landslide for a party backed by ex-President Rajapaksa in a local council vote over the weekend, while stocks opened higher.
Stocks were steady and the All Share Index was up 0.19 percent after the first half hour of trading but started to weaken later.
Bonds were quoted 20 to 40 basis points higher on Monday, dealers said.
A 03 – year bond maturing on 01.03.2021 quoted at 9.60/70 up from 9.33/33 Friday.
A 08- year bond maturing on 01.08.2026 quoted at 10.00/05 up from 9.78/85 on Friday.
"Bond buyer are concerned that foreign selling may come," a dealer said.
Analysts say investors in general do not like political uncertainty as economic reforms and fiscal consolidation which will improve debt dynamics may not progress with a lame duck administration.
However the stock market has been hit by a higher income taxes which are due to come into effect from April.
An arbitrary tax on financial transactions which may hurt economic activity has also been proposed.
The budget also placed burdens on consumers by taxing sugar in drinks.
The rupee opened at 154.55/65 to the US dollar weaker from 154.25/40 rupee.
Sri Lanka’s inflation has been high following a balance of payments crisis and the currency has continued to tumble pushing inflation up and hurting consumers and voters as the central bank weakens the rupee to target a real effective exchange rate index. (Colombo/Feb12/2018)