Sri Lanka bond yields fall, rupee gains against greenback

Jan 08, 2008 (LBO) – Sri Lanka’s government bonds rose on foreign buying and the rupee gained against the greenback to close at 108.30/40 Monday, dealers said. Bonds maturing in 15.03.09 which traded at yields as high as 19.85 fell to 19.30/40 levels in the secondary market.

When yields fall the price of the bond goes up, indicating that the bond gained from 87.4942 to 88.0012.

The yield of a 01.11.10 bond fell as low as 18.10/15 before closing around 18.30, bond dealers said.

Foreign hedge funds have been buying into Sri Lankan government high yields rupee bonds and even picked them up in the secondary market when primary issues were not available from the debt office, dealers said.

The rupee which opened around 108.52/62 closed up at 108.38/45 against the greenback in spot trade.

Dealers say foreign names were seen selling dollars and a state name which usually represents the monetary authority bought some up, preventing the rupee from appreciating further.

Meanwhile 3-month bills are quoted in the secondary market at around 20.00 percent indicating that yields at this month’s auction may come down.

A steep rise in interest rates in December has brought new money to treasuries markets allowing the Central Bank to avoid printing money.

Inflation eased in December after monetary policy was again tightened in November. Inflation rose 16.4 percent in Colombo in 2007 with tight monetary policy in the first quarters.

Almost all the inflation in the year was generated from May to November as the central bank printed 45.2 billion rupees until September loosening its previous tight monetary policy.

Stocks ended lower Monday extending two days of losses owing to continuing political and economic uncertainty, despite a firm start.

The All Share Price Index closed 21.85 points or 0.87 percent lower at 2,488.55 while the Milanka index of more liquid stocks lost 25.19 points or 0.78 percent to end at 3,195.00.

Turnover was 217 million rupees, dominated by trading in Ceylon Theatres with 30,000 shares changing hands.

The stock closed down 233.25 or 7.29 percent at 2,966.75 rupees after falling to 2,900 at the opening from the previous close of 3,200 rupees. .