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Wednesday October 20th, 2021
Bonds & Forex

Sri Lanka bondsquiet, rupee dysfunctional amid forex surrender hike speculation

ECONOMYNEXT – Sri Lanka’s bond markets were quiet ahead of the first auction without price controls for many months, while speculation rose that the country will follow Zimbabwe into a forex surrender hike.

On Tuesday 10 billion rupees of a bond maturing on 15.11.2023 and 10 billion rupees of a bond maturing on 2030 will be offered.

Price controls have been lifted on the auction.

On Money the 15.11.2023 auction bond was quoted at 7.75/8.00 percent around the same levels as 7.70/90 percent on Friday.

A 15.12.2024 bond was quoted at 8.25/8.50 percent from Friday’s 8.25/8.50 percent.

A 3-month bill was also sold around 6.40 percent, dealers said.

Meanwhile forex markets continue to be dysfunctional with a 203 decreed exchange rate for which no convertibility is offered.

As a result rupees are trading off market at 230 to the US dollar or below and banks are tightly rationing foreign exchange.

Meanwhile the central bank issued a statement explaining that some countries have surrender requirements for dollars, raising speculation that Sri Lanka will follow Zimbabwe and raise an existing requirement.

In January Zimbabwe central bank raised a surrender requirement to 40 percent from the earlier 30 percent.

“Bangladesh, India, Pakistan and Thailand have rules on conversion to respective local currencies in different percentages based on nature and the amount of repatriated export proceeds,” the central bank said without mentioning Zimbabwe. (Colombo/Sept27/2021)

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