Sri Lanka bonds volatile, CB Treasuries top Rs50bn

Sept 26, 2011 (LBO) – Sri Lanka’s bond yields ended lower after seeing unusual volatility dealers said, while the rupee continued to be defended at 110.30 to the dollar in the spot market, dealers said. Sri Lanka’s interest rates have started to move after sustained defence of a dollar peg reduced excess liquidity in money markets.

In the forex market the spot dollar was quoted at the officially defended peg rate of 110.30 rupees amid strong demand, dealers.

The Central Bank’s Treasuries stock, which represents the acquisition of domestic assets to sterilize liquidity lost due to foreign reserve sales, topped 50 billion rupees to 51.6 billion rupees.

Excess liquidity in money market was 31.5 billion rupees.

A 2016 bond dropped to dropped to 8.72 percent Monday rose to 8.90 levels and ended the day around 8.82/82 lower than Friday’s closing of 8.90/95 levels.

A 2015 bond dropped to 8.60 percent at opening and closed higher at 8.68/73 percent, easing slightly from Friday’s highs.

“The movement was unseal and reflects the market power of larger players,” a dealer said. “It (volatility) gives opportunities for market players.”

A lower interest rate increases the value of the bond, and higher yield results in a capital loss.