Sri Lanka rupee ends weaker, gilt yields flat
ECONOMYNEXT – Sri Lanka rupee closed weaker at 186.50/00 to the US dollar on Friday in the spot market while yields remained unchanged in dull market trade after the bond auction, dealers said.
The rupee closed at 185.80/186.00 to the US dollar on Thursday against the US dollar.
Standard and Poor’s, said it was downgrading Sri Lanka to ‘CCC+’ saying a high budget deficit and excess liquidity is likely to put pressure on the exchange rate and make it more difficult to repay debt.
“The latest expansionary budget measures are likely to further weaken the government’s fiscal position,” the rating agency said.
“High fiscal deficits and excessive domestic liquidity will put downward pressure on the exchange rate and worsen the risks associated with the government’s already-high debt burden. ”
It said while the government’s landslide parliamentary election victory indicated strong policy direction
“While the current administration’s clear victory in August’s parliamentary election is likely to ease such uncertainty over policy direction, “further consolidation of power in the executive may increase institutional risks”.
“This could affect the stability of the legislature or the judiciary system, and in turn, hit policy predictability and business confidence. Social stability could also be undermined if divisions along religious or ethnic lines persist. ”
In the secondary securities market, bond yields remained unchanged in dull market trade ahead of the bond auction, dealers said.
“Concluding the week, the secondary bond market witnessed low activities with thin volumes, despite the bond auction held today,” FirstCapital Research said.
“In the short end of the yield curve, 15.01.23 maturity traded at 5.75 per cent, 15.07.23 traded at 6.00 per cent while in the belly end, 15.08.27 maturity changed hands at 7.16 per cent. At the bond auction held today, a total of 84.5 billion rupees was accepted out of the total offered amount of 100 billion rupees Moreover, 01.10.23 maturity was accepted at 5.99%, 01.03.26 at 6.79% and 01.01.32 at 7.84%.”
Sri Lanka’s debt office is offered 100 billion rupees in Treasury Bonds auction to held today.
A 2-year bond maturing on 15.12.2022 closed at 5.67/75 per cent on Friday, steady from 5.67/73 per cent at Thursday’s closing.
A bond maturing on 15.01.2023 closed at 5.73/77 per cent, up from 5.70/77 per cent at Thursday’s end.
A bond maturing on 15.09.2024 closed at 6.37/44 per cent on Friday, steady from 6.37/47 per cent at yesterday’s end.
A bond maturing on 01.05.2025 closed flat at 6.50/60 per cent.
A bond maturing on 01.02.2026 closed at 6.70/80 per cent up from 6.65/75 per cent from the previous day’s end.
A bond maturing on 15.08.2027 closed flat at 7.08/18 per cent from Thursday’s end.
A bond maturing on 01.07.2028 remained unchanged from 7.23/27 per cent at Thursday’s end.
A 10-year bond maturing on 15.05.2030 remained unchanged at 7.55/75 per cent since Tuesday’s closing. (Colombo/December11/2020)