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Sri Lanka rupee gains on interventions, excess liquidity rises

ECONOMYNEXT – Sri Lanka’s rupee closed around 192.20/193.00 to the US dollar on interventions in the spot market Friday while more money was printed data showed.

In the forward market the one week closed around 193.50/194.50 to the greenback, down from 195.30/196.00 to the US dollar on Thursday.

On Friday the central bank’s Treasury bill stock went up to 291 billion rupees from 283.96 a week earlier three days after Treasury bills were undersold at the auction on Wednesday raising fears that the balance bills were bought with printed money to target 03, 06 and 12 month bill yields.

At Wednesday’s auction 22 billion rupees of bills were sold for existing money after offering 30 million rupees in bills.

The money was printed while overnight money markets were flushed with 132 billions of money printed by Thursday April 23, through ‘helicopter drop’ style liquidity injections, a statutory reserve ratio cut and a central bank profit transfer.

Another 10 billion rupees of excess money was offered to banks through a reverse repo auction, despite the excess liqudity. There were no takers.

In bond markets gilt yields eased amidst moderate trade with high liquidity seen in 2022, 2023, 2024 and 2027 maturities, dealers said.

A bond maturing on 15.12.2021 closed at 7.45/50 percent on Friday, down from 7.50/65 at Thursday’s close.

A 2-year bond maturing on 01.10.2022 closed at 8.05/15 percent down from 8.10/20 percent, on the previous day’s close.

A bond maturing on 01.09.2023 closed at 8.30/40 percent, easing from 8.45/50 percent.

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A bond maturing on 15.09.2024 closed at 8.65/75 percent on Friday falling from 8.80/84 percent at the previous day’s close.

A bond maturing on 15.10.2027 closed at 8.95/9.00 percent easing from 9.05/10 percent at Thursday’s close. (Colombo/ Apr24/2020)