Sri Lanka interest rates tighter ahead of dollar inflow

Jan 17, 2014 (LBO) – Sri Lanka’s overnight market rates and medium term bond yields picked up slightly ahead of an expected liquidity flood from a sovereign bond sale, dealers said. A 2-year bond maturing on 01 April 2016 quoted at 7.80/8.00 percent had eased from around 8.00/8.10 percent last week.

But a 3-year 01 Jan 2017 was quoted 8.10/30 percent Friday up from 8.05/8.15 percent levels last week.

A 4-year 01 April 2018 bond was quoted 8.83/87 Friday from around 8.65/70 percent last week.

A 01 July 2019 bond, auctioned last Friday at a weighted average yield of 8.65 percent was now traded at 8.95/9.05 percent levels, dealers said. Overnight repo rates were around 7.00 to 7.25 percent Friday, up from 6.80/7.00 percent levels a week earlier dealers said.

Excess liquidity in money markets dropped 12.9 billion rupees on Thursday from 53 billion rupees a week earlier, with the monetary authority withdrawing cash.

Next week, proceeds of a billion US dollar bond are expected in the country. Liquidity will be generated from the bond in money markets to the extent dollars are sold by the Treasury to finance its domestic expenses.

At a Treasury bill auction earlier this week, bill yields fell, but longer end rupee bond yields have edged up slightly over the past few days, taking pause after steadily falling over several weeks.

A bond maturing on July 15, 2015 bond now quoted at 7.60/70 percent, had eased from 7.70/7.90 percent a week earlier.