ECONOMYNEXT – Sri Lanka’s rupee was quoted at 305.25/50 to the US dollar in early morning trade Wednesday, steady from 305.25/35 to the US dollar at yesterday’s close while bonds were quoted wide, dealers said.
Bond market activity was somewhat muted after a rise in Treasury bill yields last week, dealers said.
Interest rates fell after a spike in un-sterilized liquidity from dollar purchases (strong side pegging), but the rupee comes under pressure due to lack of a complementary exchange rate policy to back the strong side pegging when liquidity is used up, analysts have said.
Overnight excess liquidity spiked to almost 200 billion rupees in late May.
Excess liquidity is now down but the central bank is injecting some money overnight. Seven-day term money was injected below the overnight rate. At the moment private credit is still muted.
Due to deeply flawed operational frameworks, build on statistics rejecting classical economic principles and laws of nature, currencies of IMF dependend countries tend to depreciate permanently, nominal interest rates and inflation tend to be high, critics say.
A bond maturing on 01.06.2026 quoted at 10.60/11.00 percent indicative Wednesday down from yesterday’s close of 10.75/11.05 percent.
A bond maturing on 15.12.2026 was not quoted in morning trade. The bond closed at 10.65/11.05 percent Tuesday.
A bond maturing on 15.10.2027 quoted at 10.70/11.10 marginally higher from 10.65/11.10 percent.
A bond maturing on 15.03.2028 quoted at a 11.25/50 marginally higher from 11.20/11.50 percent.
A bond maturing on 15.09.2029 quoted at 12.10/20 a little wider from 12.10/15 percent.
A bond maturing on 01.12.2031 quoted at 12.10/20 unchanged from 12.10/20 percent.
(Colombo/Jun26/2024)