Oct 05, 2011 (LBO) – Sri Lanka’s central bank has announced a 15 billion rupee reverse repo cash auction to inject liquidity which can stabilize spiking rates in the overnight market, dealers and analysts said. The reverse repo auction will help cap rates with the monetary authority acting as a central counter party, analysts said.
Overnight rates in the repo markets spiked to 7.45 percent and call rates rose to 8.30 percent this week amidst falling liquidity due to dollar sales to defend a peg.
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Rates were rising despite existing excess liquidity due to exposure limits within banks.