Sri Lanka rates up as liquidity tightens; CB bill stock Rs151bn

Jan 16, 2008 (LBO) – Overnight money rates spiked in Sri Lanka’s inter bank market and bond rates picked up amid tighter liquidity and the monetary authority opened its 12.00 percent liquidity facility, dealers said.

Market participants parked 7.7 billion rupees at the repo window of the central bank by Friday while borrowing 14.1 billion rupees indicating a heightened perception of counterparty risk, dealers said.

The spot dollar was quoted at 113.80/114.00 rupees.

But a state name that usually represents the central bank was offering dollars at 113.87 rupees, dealers said.

Recast Overnight call rates which were around 13.00/50 percent levels spiked to 16.00/50 as the inter bank market was short on a net basis.

On Thursday the banking system was short by 1.9 billion rupees, a reversal of the net excess levels seen earlier.

On Friday authorities opened the 12.0 percent liquidity facility with an estimated seven billion rupee cash short in the market, representing a large dollar payment from the system, dealers said.

The central banks, unrestricted reverse repo window which effectively serves as the ceiling on inter bank borrowing is now at 17.00 percent after a 200 basis point cut on Monday.

Bond yields also picked up Friday. A 4-year 01.04.12 bond which traded around 17.75 percent a day earlier rose to 18.18 percent and was quoted at 18.10/15 percent.

A 2-year bond maturing on 15.12.10 is offered at 18.00/18.10 percent, dealers said.

Meanwhile the Central Bank’s T-bills stock which is indicative of central bank credit to government and reserve losses rose to 143.9 billion rupees on January 15, from 131 billion at the beginning of the week.

On Friday the bill stock rose to 151.1 billion rupees.