The Investor Sentiment - Equity and investments forum for Sri Lankans
Search
 
 

Display results as :
 


Rechercher Advanced Search

Latest topics
» විශිෂ්ඨ සිල්ලර වෙළෙන්දෙකුගේ ජීවිත කතාව
Today at 12:15 pm by Ethical Trader

» Flying is the Safest mode of Transport
Today at 6:37 am by කිත්සිරි ද සිල්වා

» AAIC.N0000
Yesterday at 9:50 pm by serene

» අනං මනං! #/+?.<>
Yesterday at 8:40 pm by ruwan326

» Thread for News on CSE and SL Economy
Yesterday at 8:26 pm by ruwan326

» MTD WALKERS - KAPI
Yesterday at 5:18 pm by PANTOMATH

» REXP.N0000 ( RICHARD PIERIS EXPORTS PLC)
Yesterday at 11:51 am by yellow knife

» AMF.N0000
Yesterday at 11:23 am by serene

» இனிய பொங்கல்
Tue Jan 15, 2019 9:15 pm by nihal123

» DIPD.N0000 (Dipped Products)
Tue Jan 15, 2019 8:18 pm by PANTOMATH

» HUNA.N0000
Mon Jan 14, 2019 5:29 pm by Ethical Trader

» Blessing in Disguise!! It's high time Brothers!!
Sun Jan 13, 2019 11:35 am by serene

» Thread for News on Local and Foreign Politics
Sat Jan 12, 2019 8:26 am by ruwan326

» LLUB.N0000 (CHEVRON LUBRICANTS LANKA PLC)
Thu Jan 10, 2019 8:45 pm by PANTOMATH

» කෝටි 4620 ක බැඳුම්කර නීතියට පිටින් ශ‍්‍රී ලංකන්ට දීලා
Mon Jan 07, 2019 6:18 pm by Ethical Trader

» JINS.N0000 ( Janashakthi Insurance PLC)
Sun Jan 06, 2019 1:12 pm by smallville

» Dividend Announcement
Sun Jan 06, 2019 4:28 am by serene

» Thread for News on International Markets
Fri Jan 04, 2019 9:40 am by The Invisible

» LDEV - Lankem Developments
Tue Jan 01, 2019 8:14 pm by ruwan326

» අවුරුද්ද අප කයි - අපි අවුරද්ද කමු (ජනවාරි පළමුවැනිදා)
Tue Jan 01, 2019 6:23 pm by malanp

» සැන්ඩි එපා!
Tue Jan 01, 2019 6:01 pm by serene

» අසිරිමත් සුබ නව වසරකට ආසිරි !
Tue Jan 01, 2019 5:08 pm by PANTOMATH

» SHL.N0000 (Softlogic Holdings PLC)
Mon Dec 31, 2018 6:04 pm by EBHRAHIMCANADA

»  වසරක කාලය තුළ ඉන්දියාවේ ඉහළම ආදායම් ලාභීන්
Mon Dec 31, 2018 2:47 am by nihal123

» අයදුමේ දී ඡායාරූප ‘ඇලවීම‘ අවශ්‍ය නැති ජාතික හැඳුනුම්පත ජනවාරි 01 සිට දිවයිනටම
Sun Dec 30, 2018 9:37 pm by lanka

» මැදපෙරදිගට පමණක්‘ පාස්පෝට් මින් ඉදිරියට නැහැ
Thu Dec 27, 2018 5:18 pm by Ethical Trader

» BFN - Orient Finance
Wed Dec 26, 2018 6:53 pm by serene

» Wishing Everyone a Happy Christmas !
Wed Dec 26, 2018 7:27 am by spw19721

» Happy Birthday
Tue Dec 25, 2018 11:13 am by sashimaal

» Trading Journal
Sat Dec 22, 2018 11:11 am by PANTOMATH

» COMB.N0000 ( COMMERCIAL BANK OF CEYLON PLC )
Fri Dec 21, 2018 9:41 am by The Invisible

» In the Meantime, Within Our Shores !
Thu Dec 20, 2018 9:44 am by කිත්සිරි ද සිල්වා

» Buy International English Language Testing System (IELTS) in jordan((WhatsApp:+237675967490))
Mon Dec 17, 2018 10:55 am by nihal123

» AINS - Arpico Insurance
Thu Dec 13, 2018 10:43 am by The Invisible

» CFVF - First Capital
Thu Dec 13, 2018 5:18 am by Ethical Trader

» Obituary Notice.
Wed Dec 12, 2018 11:18 am by sashimaal

» බඩගිනී
Tue Dec 11, 2018 9:20 am by Ethical Trader

»  Rajgama heroes !
Sun Dec 09, 2018 9:43 am by කිත්සිරි ද සිල්වා

» BOPL.N0000 (Bogawantalawa Tea Estates PLC)
Fri Dec 07, 2018 7:35 am by The Invisible

» Sri Lanka economic slowdown trims company profits, bank earnings grow
Thu Dec 06, 2018 3:04 pm by nihal123

» Better Than Bitcoin
Thu Dec 06, 2018 9:42 am by කිත්සිරි ද සිල්වා

» Hutchison, Etisalat complete mobile networks merger in Sri Lanka
Wed Dec 05, 2018 9:30 am by The Invisible

» Oil prices surge more than 5-pct
Mon Dec 03, 2018 1:53 pm by Ethical Trader

» CCS.N0000 ( Ceylon Cold Stores)
Mon Dec 03, 2018 10:03 am by The Invisible

» HAYC - Haycarb
Sun Dec 02, 2018 3:04 pm by xmart

» LGL Laugfs Gas
Fri Nov 30, 2018 9:43 am by The Invisible

» Oil prices gain as investors eye Fed relief on interest rates
Fri Nov 30, 2018 9:41 am by The Invisible

» ලැයිස්තුගත සමාගම් 8 ක් කොටස් ගනුදෙනු තහනම් වීමේ අවදානමක
Thu Nov 29, 2018 11:34 am by nihal123

» අපි තනිකර ලෝකය දිව යන්නේ
Thu Nov 29, 2018 11:32 am by කිත්සිරි ද සිල්වා

» NDB.N0000 (NATIONAL DEVELOPMENT BANK PLC)
Thu Nov 29, 2018 10:32 am by The Invisible

January 2019
SunMonTueWedThuFriSat
  12345
6789101112
13141516171819
20212223242526
2728293031  

Calendar Calendar

Disclaimer


Information posted in this forum are entirely of the respective members' personal views. The views posted on this open online forum of contributors do not constitute a recommendation buy or sell. The site nor the connected parties will be responsible for the posts posted on the forum and will take best possible action to remove any unlawful or inappropriate posts.
All rights to articles of value authored by members posted on the forum belong to the respective authors. Re-using without the consent of the authors is prohibited. Due credit with links to original source should be given when quoting content from the forum.
This is an educational portal and not one that gives recommendations. Please obtain investment advises from a Registered Investment Advisor through a stock broker

Sri Lanka gilt yield curve flattens amid currency pressure

Go down

Sri Lanka gilt yield curve flattens amid currency pressure

Post by The Invisible on Tue Oct 16, 2018 7:30 am

ECONOMYNEXT - Sri Lanka's longer term bond yields remained subdued while short tenors spiked in October as a rate cut and liquidity spikes pressured a soft-peg with the US dollar forcing authorities to stop pushing down the short end of the yield curve to protect the currency.

There is strong demand for medium to longer term bonds at around 12.00 to 12.25 percent, dealers say.

Sri Lanka has high nominal interest rates are common in countries with permanent currency depreciation.

Permanent depreciation generates perceptions of a weak currency that foreign investors factor in, while domestic market participants also panic because the currency does not usually bounce back which generates runs and rate spikes.

When currencies fall, inflation tends to go up from the traded sector (exports and imports) even if domestic credit is weak and non-traded price rises are muted, analysts say.

On Friday bond yields spiked and fell back. Dealers said there was also foreign investor interest.

On Monday a 3-year bond maturing on 15.10.2021 was quoted at 11.30/50 percent, down from Friday's peak of 11.90 percent.

A 5-year bond maturing on 15.07.2023 was quoted at 11.65/75 percent, down from Friday's peak of 12.05 percent.

The risk free yield curve is now flatter than at the beginning of the year, amid perceptions that the current high interest rates are due to currency pressure, which may ease.

Authorities allowed unsterilized excess liquidity to build up twice in 2018, despite rising US rates, causing short term rates to fall, but did not consistently follow through with unsterilized sales. A sharp switch to a floating style regime with excess liquidity intact, has generated runs on the currency.

Low short term rates encourage market participants, such as exporters to borrow domestically and delay conversion, and importers to borrow and settle bills quickly, worsening pressure on the currency. Swap rates are also against the rupee during those times.

However monetary policy has been broadly supportive of the rupee for almost three weeks, with liquidity short in money markets, and rates gradually adjusting. Sri Lanka has a ceiling policy rate of 8.50 percent, which is over three times that of the US.

If pressure on the currency eases, interest rates will gradually fall.

The flattening of the yield curve was also seen at a bond auction last week.

An offer of 20 billion rupees of 2033 bonds was snapped up at an average yield of 11.90 percent, at a cut-off around 12.0 percent with bids of 55 billion rupees coming in.

But a 20 billion rupee auction of 5-year 2023 bonds drew bids of 48.6 billion rupees, and the central bank forced on dealers at an average yield of 11.69 percent under a coercive bond sale scheme after bids came in close to the longer tenor.

The forced purchase may have come because of a mis-understanding on the development of the yield curve or the usually prevalent bureaucratic coercive mindset that has brought instability to the country in the past, according to market participants.

However a flattening of the yield curve also shows improved debt managed compared to 2015 and 2016.

In the so-called bondscam years, long tenor bonds were issued in excess of the volume that long term buyers could absorb amid allegations of corruptions, despite claims that fiscal policy would improve in two years.

If there is short term pressure, a private borrow would try to borrow short tenor or at floating rates and go for fixed tenors when rates are down.

Last week the central bank allowed Treasury bill yields to go up after rejecting offers for two weeks. In countries with sustainable pegs, short term rates fluctuate freely.

There is a sharp bend in the yield curve at around 3-years, with a sharper slope in shorter tenors. Whether this is due to better liquidity, greater ability for primary dealers to raise funds in the repo market with more banks willing trade them, or insufficient issues at the lower end, is not clear.

Analysts have said that the central bank generally pressures the currency and generates full blown balance of payments crises by rejecting bids at the Treasury bill auctions and purchasing them with printed money at non-transparent rates, either to push up excess liquidity or to fill interventions (sterilize forex sales) and keep rates down artificially. (Colombo/Oct15/2018)
avatar
The Invisible

Posts : 877
Join date : 2016-11-28
Age : 39

Back to top Go down

Back to top


 
Permissions in this forum:
You cannot reply to topics in this forum