Still falling

Long term bond yields fell again at this weeks auction, with the Rs 2000 mn issue being oversubscribed around three times.
The weighted average ten-year yield fell to 7.71% (48 basis below January auction) and 15-year yield fell to 7.63% (down 145 basis points).rn

rnThe secondary market was already trading around these levels, with traders having already anticipated the rates.rn

rnWith inflation continuing to fall (July Colombo District CPI moving average 3.9%, July Sri Lanka CPI 6.7%) future inflationary expectations are coming down.rn

rnIn addition fiscal restrain has also put a cap on new issues.rn

rnIf anticipated foreign aid inflows materialize analysts say domestic government debt issues are likely to be in short supply in the future.rn