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Sri Lanka bond yields up on auction shift, rupee stronger

ECONOMYNEXT – Sri Lanka’s bond yield rose for the third day after the Central Bank spooked the market by suddenly bringing forward a pre-announced bond auction and the rupee gained sharply on dollar selling, dealers said.

Stocks closed 0.29 percent down with the Colombo All Share Index falling 15.99 points. The S&P 20 index of more liquid stocks fell 0.35 percent to close at 2,708 points.

Stocks usually fall when liquidity shortages emerge from currency defence and underlying earnings of companies also fall when currencies fall and people lose purchasing power. Sri Lanka’s banks have also been hit by bad loans.

Sri Lanka’s Central Bank printed money and triggered a period of monetary instability in 2018, just as the economy and recovered from a currency collapse in 2015/2016 from 130 to 150 to the US dollar.

The rupee stabilized and the Central Bank has been buying dollars in recent weeks defending the strong side of a peg and allowing it to move on day-to-day demand.

The rupee strengthened to 177.40/55 to the US dollar in the spot market Tuesday from 178.00/15 on Monday, dealers said.

The rupee closed at 178.00/15 to the US dollar in the spot market on Friday.

Bond ended slightly higher for the third straight day. Rates started edging up from Friday onward after the Central Bank suddenly brought forward an auction.

The Central Bank’s decision to move a Treasury Bond auction a week earlier to April 2 has seen slight selling interest, dealers said.

Twelve month bills closed at 10.32/48 wider Tuesday from 10.35/45 percent on Monday.

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A bond maturing on 01.08.2021 closed at 10.65/70 percent, flat from 10.65/75 percent.

A bond maturing on 15.07.2023 closed at 10.90/11.00 percent, up from 10.85/95 percent.

A 5-year bond maturing on 15.03.2024 closed at 11.02/07, slightly higher from 11.00/05 percent on Monday, stable from Friday’s close of 11.00/03 percent.

A bond maturing on 01.08.2026 closed at 11.15/30 percent, up from 11.10/20 percent, up from the previous close of 11.05/12 percent.

A bond maturing on 15.06.2027 closed at 11.30/37 percent, up from 11.25/35 percent, up from 11.20/30 percent.

A bond maturing on 01.09.2028 closed at 11.32/40 percent up from 11.30/40 percent, stable from the previous 11.30/50 percent.

A bond maturing on 01.05.2029 closed at 11.43/45 percent, up from 11.40/45 percent, unchanged from Friday. (Colombo/Mar26/2019-SB)

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