Sri Lanka rupee ends weaker in one-month forwards, gilt yields steady

ECONOMYNEXT – Sri Lanka rupee closed weaker around 192/192.50 to the US dollar in the one month market on Tuesday, while bond yields steady, dealers said.

Sri Lanka rupee last closed at 191/193 levels on Monday.

Central Bank has extended exchange controls introduced after a steep fall in the currency around March and April 2020, in the wake of a bout of money printing till July 01, 2021.

Central Bank Governor W D Lakshman also said yesterday that Sri Lanka’s import controls on so-called ‘non-essential’ goods are essential to stop foreign exchange ‘leakages’ promising a vigorous review of a post 1977 ‘open economy,’ amid record money printing.

“Overall, while working within a framework of the market economy, the performance of the open economy policies introduced from 1977 will be reviewed vigorously, so that the country and its economic agents could follow a focused approach to becoming an industrial economy,” Governor Lakshman said delivering a policy roadmap for 2021.

“A policy framework with such long-term objectives would generate greater macroeconomic benefits than being driven by short-term vicissitudes in the market and unbridled desire for short-term financial gains.”

Sri Lanka is now pursuing an ‘import substitution’ strategy to ‘save foreign exchange’.

In the secondary securities market, bond yields steady in dull trade dealers said.

A 2-year bond maturing on 15.12.2022 closed at 5.60/54 per cent on Tuesday, steady from 5.60/65 per cent at Monday’s end.

“Investors in a lull”, First Capital Market Research said.

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“The secondary market yield curve remained steady while the overall market witnessed ultra-thin volumes. Limited activity was seen on the shorter end of the curve with 01.08.21 trading at 4.77% and 01.10.22 trading at 5.57%.”

A bond maturing on 15.01.2023 closed at 5.65/70 per cent, flat from the last closing.

A bond maturing on 15.09.2024 closed steady at 6.35/40 per cent on Tuesday, from 6.35/42 per cent at Monday’s end.

A bond maturing on 01.05.2025 closed at 6.50/60 per cent on Tuesday, unchanged.

A bond maturing on 01.02.2026 closed at 6.65/75 per cent, down from 6.68/75 at the previous day’s end.

A bond maturing on 15.08.2027 closed at 7.07/17 per cent, down from 7.15/20 per cent.

A bond maturing on 01.07.2028 closed at 7.15/25 per cent, down from 7.20/30 at the previous day’s end.

A 10-year bond maturing on 15.05.2030 closed at 7.65/85 per cent, down from 7.70/85 per cent at Monday’s closing. (Colombo/Jan05/2021)

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