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Bloomberg Comment – 25-10-2018

Rupee Bonds Seen Weighed Down by Slow Inflows: Inside Sri Lanka

By Anusha Ondaatjie

(Bloomberg) — Sri Lanka’s bond prices will be weighed down in the short-term by a lack of fund inflows, according to First Capital.

* The nation’s low FX reserve levels and a lack of inflows in the short term to hold back yields from moving lower, says Dimantha Mathew, head of research at First Capital

* If the central bank holds the benchmark borrowing rates at current levels then slow downward shift of the rupee against dollar will continue

NOTE: Sri Lanka’s monetary policy has been conservative, central bank Governor Indrajit Coomaraswamy said on Tuesday; the nation’s growth, which is forecast to be about 4% by end-2018, will be inadequate even though its on an upward trend

* Sri Lanka’s inflation well within central bank target even as the bank would like lower T-bill rates: Coomaraswamy

NOTE: Monetary authority rejected all bids at a sale of 3.5b rupees ($20m) of 91-day treasury bills on Tuesday; the central bank sold 7.5b rupees of 364-day bills at 10.39%, down from 10.44% at previous auction; local markets were shut on Wednesday for a holiday

*Yield on 10.2% govt bonds due July 2023 rose 5 bps on Tuesday to 11.35%, data compiled by Bloomberg show

*USD/LKR steady at 172.65 after reaching a record high of 172.98 on Oct. 23

*Overseas investors sold a net $0.3m of local stocks on Tuesday, taking outflows so far this month to $19.3m: exchange dataTo contact the reporter on this story:

First Capital is an investment bank offering independent advice and transaction execution relating to capital raising and other strategic needs including mergers and acquisitions for investment in Sri Lanka. The Company’s industry leading transactions are reflective of the ingenuity in enabling the most opportune financing processes for our clients. First Capital’s services for investment in Sri Lanka include a total service for public offers of corporate debt, acting in the capacity of managers/ financial advisors and placement agents, in addition to due diligence, pre-offer preparation, offer management, distribution strategy and after-market advisory services, initial public offerings, secondary offerings such as rights issues, corporate actions including mandatory and voluntary offers, private placements and at-market placements of listed securities.