Sri Lanka rupee steady, bond yields edges lower

ECONOMYNEXT – Sri Lanka rupee opened steady around 176.30/40 Monday while bond yields were edging lower dealers said, amid weak private credit, while overnight rates were hitting a floor set by repo auctions.

In May there had been some sales of rupee bonds by foreign investors, but private credit is weak. On Friday the rupee weakened.

The central bank has announced two and four day repo auction to mop up excess liquidity. On Friday excess liquidity was 43 billion rupees, with the central bank mopping up 10 billion rupees at between 8.35 and 8.49 percent.

Overnight markets are liquid largely from money generated from dollars purchased in April.

When the central bank buys dollars new money is created, expanding base money. When it sells dollars to defend a peg, base money contracts as rupees a sucked out.

In bond markets, yields were seen edging lower, dealers said. Though weaker economic output shown by falling imports may reduce revenues, weak private credit has created space in the banking system.

A bond maturing on 15.12.2021 was quoted at 9.70/80 percent Monday from 9.75/85 percent Friday.

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A bond maturing on 15.03.2022 was quoted 9.88/93 percent from easing from the previous close of 9.90/10.00 percent.

A bond maturing on 15.07.2023 was quoted 10.25/32 percent down from Friday’s 10.30/35 percent.

A bond maturinng on 15.03.2024 was quoted at 10.37/42 percent, from 10.42/43 percent Friday.

A bond maturing on 01.08.2026 was quoted at 10.55/68 percent from Friday’s 10.55/72 percent.

A bond maturing on 15.01.2027 was quoted at 10.67/72 percent from Friday’s 10.70/75 percent

A bond maturing on 01.05.2029 was quoted at 10.85/90 percent unchanged from Friday. (COLOMBO, 10 May, 2019)