Sri Lanka rupee plunges, bonds high on political uncertainty
ECONOMYNEXT – Sri Lanka’s rupee fell to 155.45/55 against the US dollar in the spit market Wednesday morning down from 154.95/10 a day earlier, dealers said, as the future of a ruling coalition hung in the balance following a shock defeat at local council polls.
The currency has fallen over around one rupee against the US dollar from 154.35 on Friday.
Bond markets were illiquid Wednesday morning ahead of a Treasury bill auction after rising about 30 basis points Monday, but remained at the same levels, dealers said.
Stocks markets remained steady despite a spate of poor earnings from hotels and manufacturing firms, though the banking sector earnings were growing, brokers said.
Economic analysts say the rupee has to be allowed to move freely at this time, unless the central bank is prepared to allow rates to go up. If the peg is defended rates have to be allowed to go up as soon as excess liquidity is mopped up.
Money markets are still liquid with previous dollar purchases by the central bank.
The outlook for interest rates has changed, with expected market pricing of energy uncertain after the defeat of the United National Party by Mahinda Rajapaksa backed Sri Lanka Podujana Peramuna which emerged the largest single party.
On Wednesday most maturities quoted at the same levels as Wednesday when foreign selling was seen on two year bonds. But the 2026 bond were about 10 basis points higher after one hour of trading, dealers said.
Bonds were quoted at following rates after opening:
2-year bond maturing on 01.07.2019 was quoted at 9.40/50 up from Fridays 9.10/15 percent.
2-year bond maturing 01.05.2020 was quoted at 9.40/65 up from Friday’s 9.0/30 percent.
3-year bond maturing on 01.03.2021 was quoted 9.60/70 from Friday’s 9.20/30 percent
8-year bond maturing on 01.08.2026 was quoted at 10.00/10 from Friday’s 9.75/80 levels
10-year bond maturing on 15.06.2027 was quoted 10.00/15 from Friday’s 9.80/90 percent
12-year bond maturing n 15.05.2030 was quoted around 10.10/35 from Friday’s 9.95/05 percent.
15-year bond maturing on 15.01.2033 was quoted at 10.15/45 from Friday’s 10.05/10.15 percent. (Colombo/Feb14/2018)