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Sri Lanka rupee closed weak, gilt yields down

ECONOMYNEXT – Sri Lanka rupee ends weaker at 184.75/90 to the US dollar on Wednesday while bond yields eased, dealers said.

The rupee closed at 184.30/40 against the greenback on Tuesday.

Sri Lanka’s Minuwangoda Brandix COVID-19 cluster which cropped up in the community after almost 3-months without any cases in the community has continued to increase while officials aggressively contact tracing to contain the spread.

Meanwhile the opposition Samagi Jana Balavegaya is is saying the government is trying to blame Brandix for the second wave of Covid 19 infections while the fault lies with the state as it failed to carry out enough random testing to confirm that the virus was not spread in the community.

In the money market, overnight liquidity reduced to 177.04 billion rupees on Wednesday, down from 183.72 billion rupees on Tuesday.

Banks deposited 177.04 billion rupees through the central bank’s excess liquidity window.

A Colombo based think-tank said that Sri Lanka should be careful about inflation as credit up with money being printed to support emergency coronavirus crisis fund.

“If persisted with for any length of time, the monetary financed stimulus can push up inflation,” Institute of Policy Studies said ahead of the release of its State of the Economy report.

Credit growth to the private sector remains sluggish at 5.2 per cent as of August 2020 while money supply growth has picked up sharply, at 17.5 per cent in August 2020 compared to 7 per cent at end 2019, IPS said.

Sri Lanka’s interest rates have fallen amid weak credit growth and the central bank also cut rates.

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In the secondary securities market, bond yields eased while the overall the market was active, dealers said.

Sri Lanka’s debt office offered 40 billion rupees split into 9 billion rupees maturing in 3-months, 15 billion rupees split into 6-months and 16 billion rupees maturing in 12-months, in an auction held today.

The state debt office sold 40 billion rupees in bills, the exact amount offered, while offers of up to 79.24 billion rupees were received.

A 2-year bond maturing on 15.12.2022 closed at 5.52/57 per cent on Wednesday, down from 5.57/62 per cent at Tuesday’s closing.

A bond maturing on 15.01.2023 closed at 5.53/58 per cent, down from 5.60/68 per cent at the last closing.

A bond maturing on 15.09.2024 closed at 6.00/10 per cent, easing from 6.07/12 per cent at the previous closing.

A bond maturing on 01.05.2025 closed at 6.25/33 per cent, slipping from 6.35/40 per cent at the last closing.

A bond maturing on 01.02.2026 closed at 6.50/60 per cent on Wednesday, falling from 6.60/65 per cent at the previous day’s end.

A bond maturing on 15.08.2027 closed at 6.80/90 per cent on Wednesday, down from 6.88/95 per cent at the previous day’s end.

A bond maturing on 01.07.2028 closed at 7.05/15 per cent, falling from 7.10/18 per cent at the previous day’s end.

A 10-year bond maturing on 15.05.2030 closed at 7.25/35 per cent, easing from 7.30/50 per cent at the previous day’s end. (Colombo/Oct14/2020)

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