Debt Report: Thin activity in Sri Lanka markets, liquidity surplus dips

Nov 07, 2015 (LBO) – There was thin activity in Sri Lanka’s bond market with foreign remittances balancing importer dollar demand in the currency market.

Market eyes are on Fed policy meeting Dec 15-16, with Federal funds futures showing a 79-percent chance the Fed will end seven years of near-zero interest rates and about 50 percent chance of a second rate rise by March.

Federal Reserve Chair Janet Yellen could argue that U.S. labor market is healthier to raise benchmark interest rates this month, but dissenters argue that the hike will be counterproductive.

“There was hardly a trade in the bond market, there’s little activity in the currency market as well,” a dear said.

“I am holding to my view that there won’t be a US rate hike this month,” he said.

Comments by the IMF that Sri Lanka has not yet applied for balance of payments support was noted by market participants who said there was no real crisis that requires a support facility.

“There is no real crisis at the moment, so this borrowing may not happen immediately,” a trader said.

The rupee was quoted flat against the dollar at 143. 25/30, while 10-year bonds were unchanged at 9.35 percent.

The liquidity surplus was down to 84.9 billion rupees on Friday from 101 billion rupees on Thursday, likely on some government securities held by the Central Bank maturing, dealers said.