Sri Lanka bond markets illiquid after rate spike

Sept 30, 2008 (LBO) – Trading in Sri Lanka’s bond markets dried up Tuesday as market participants took stock of a sudden spike in rates at an auction a day earlier, amidst turmoil in international markets, dealers said. The government sold a bond maturing in July 2012 at 19.09 percent on Monday, up steeply from an earlier auction of 17.48 percent on September 18.

A bond maturing in June 2011 was sold for 19.22 percent up from 17.89 percent on September 18.

A bond maturing in July 2010 was sold at 19.33 percent up from 18.18 percent at the last auction on August 01.

Rates have been rising steadily over the last week amidst turmoil in international markets.

The bond maturing in July 2012 which was sold for a weighted average yield of 19.09 percent was earlier quoted around 18.40/18.80 percent.

“There are offers but hardly any bids,” a dealer said. “Quotes are wide.”

The July 2010 bond was quoted around 19.35/20.00 percent, the June 2011 bond at around 19.35/20.00 percent and the July 2012 bond at around 19.00/1975 dealers said.

Sri Lanka’s forex markets have also been tight with authorities pouring dollars to keep the rupee pegged at 107.90 levels against the US dollar, and engaging in sterilized intervention activity.