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Sri Lanka forex markets inactive, bond yields down

ECONOMYNEXT – Sri Lanka’s forex markets were inactive for the second day with no activity in the spot market and sporadic quotes for the one week dollars in the forward market, after liquidity injections and a rate cut, while bonds edged lower Wednesday dealers said.

The one week forward dollar was offered at around 185.50 rupees but there were no bids, dealers said.

On Tuesday the one week forward rupee was closed at 185.60/00 after opening around 185.30/40 to the US dollar dealers said.

The spot market was also inactive Tuesday. Sri Lanka’s rupee ended weaker at 183.85/184.05 to the US dollar on Friday down from 182.90/183.30 to the US dollar at Thursday’s close.

The central bank cut rates by 25 basis points on Monday in an emergency move following the actions of floating rate central banks, after making 40 billion rupees cash injection on Friday.

On Tuesday excess liquidity topped 140 billion rupees with 80 billion rupee mopped up overnight.

Banks deposited 74 billion rupees in the excess liquidity window Friday after the injection. On Tuesday more cash from a 100 basis point reserve ratio cut, further worsening fears for the country’s currency peg.

In the government securities yield were lower in active trade dealer said, with the prospects of a 500 million dollar loan from China coming on stream. Sri Lanka was originally planning to sell a Samurai bond in the first quarter.

A 12-month Treasury bill was quoted at 8.25/30 percent Wednesday down from 8.30/40 percent on Tuesday, dealers said ahead of a bond auction.

A bond maturing on 15.12.2021 was quoted at 8.55.70 down from 8.85/9.00 percent on Tuesday.

A newly auctioned 2-year bond maturing on 01.10.2022 was quoted at 9.05/10 percent down from 9.20/28 percent.

A bond maturing on 01.09.2023 was quoted at 9.35/45 down from 9.55/65 percent.

A bond maturing on 15.09.2024 was quoted at 9.60/62 down from 9.76/82 percent.

A bond maturing on 15.10.2027 was quoted at 98.85.90 down from 09.85/9.00 percent.

A bond maturing on 15.09.2034 was not quoted. Last Friday the bond was quoted 10.00/40 percent. (Colombo/ Mar18/2020)

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