ECONOMYNEXT – Sri Lanka’s bond yields were steady on Tuesday with stronger interest ahead of a bill and bond auction with only some maturities drawing investor interest, dealers said.
A bond maturing on 01.12.2024 was quoted at 9.60/90 on Tuesday unchanged from 9.60/90 a day earlier.
A 15.01.2027 bond was quoted at 11.35/45 percent slightly up from 11.30/50 percent a day earlier.
Three month bills were quoted at 8.00/40 percent from 8.00/30 a day earlier.
There are strong expectations that a bill auction for 56.5 billion rupees on Tuesday will succeed.
The central bank has so far only allowed 3 month bills to rise to market levels.
A 35 billion rupee bond auction has also been announced for Thursday which is also tipped to succeed, unless bureaucrats try to resist.
The central bank has been buying bonds into its balance sheet to create balance of payments trouble and possible sovereign default though analysts say it is probably violates the agency’s constitution.
The Monetary Law set up by a US money doctor in the lines of the Argentina’s central bank has wide discretion including the key Latin America clause (sterilizing the BOP).
The money doctor, however has advised the central bank not to go against trend changes of interest rates.
The MLA has also been tinkered with by Mercantilists adding more ways to inject money including for rural credit in later years.
Authorities have set a 203 to the US dollar peg to the US dollar. However the peg has not credibility due to the bond and bill purchases and the control of overnight rates leading to frequent currency crises, when prolonged liquidity injections take place. (Colombo/Oct26/2021)