Sri Lanka overnight rates fall after rate cut, bonds edge up

ECONOMYNEXT – Sri Lanka’s overnight money market rates eased after the Central Bank cut policy rates Friday, as the rupee weakened to 176.50/65 rupees to the US dollar in early spot market trading, while gilt yields edged higher and stocks gained 0.10 percent, market participants said.

The rupee closed at 176.40/50 rupees to the US dollar in the spot market on Wednesday.

Overnight call money was quoted lower at 7.90/8.05 percent, down from 8.43 percent average the previous day, and repo was down to 7.95/8.10 percent from the previous day’s 8.58 percent average.

Sri Lanka’s central bank has cut its policy corridor by 50 basis points to 7.50 percent and 8.50 percent as a credit contraction has made the floor rate the active policy rate.

Private sector credit fell in early 2019, following prolonged liquidity shortages to defend the currency which collapsed amid liquidity injections.

In the secondary bond market, yields were higher in early trading as investors had already anticipated and factored in the rate cut, dealers said.

A bond maturing on 15.12.2021 was quoted at 9.35/45 percent on Friday, down from 9.40/45 percent at Thursday’s close.

A bond maturing on 15.03.2023 was quoted at 9.85/88  percent, gaining from 9.83/88 percent.

A bond maturing on 15.03.2024 was quoted flat at 9.97/10.02 percent.

A bond maturing on 01.08.2026 was quoted at 9.35/30 percent, up from 9.25/32 percent.





A bond maturing on 15.01.2027 was quoted at 10.32/39 percent on Friday, up from 10.30/37 percent at the previous close.

A 10-year bond maturing on 01.05.2029 was quoted at 10.42/50 percent, easing from 10.45/52 percent.

In equities, Colombo’s All Share Price Index (ASPI) was up 8.33 points to 5,332.87 and the S&P SL20 of more liquid stocks gained 0.32 percent or 7.71 points to 2,485.91, in the first hour of trading.

The market turnover was 14.7 million rupees with 34 stocks gaining and 24 declining.

John Keells Holdings gained 0.90 cents to 138.90 rupees and RIL Property PLC was 0.90 cents higher at 6.90 rupees. (COLOMBO, 31 May 2019)

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