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First Capital recommends investors to reduce exposure in low yield bonds


Aug 01, 2019 (LBO) – Sri Lanka’s First Capital recommends investors to reduce overall portfolio exposure to 45 percent from 60 percent.

The firm recommends cutting 2021 and 2022 maturities of the carrying portfolio amidst the significant reduction in yields.

They also recommended an increase in 2023 and 2024 maturities in the trading portfolio amidst the slight rise in yields.

First Capital, however, maintained their yield curve expectations in the bond market for the next couple of months.

Yields dipped during last few weeks primarily led by Sri Lanka’s successful International Sovereign Bond.

Following the issuance, foreign reserves exhibited a significant improvement reaching 8.8 billion US dollars as at end of Jun 2019.

First Capital expects reserve to be maintained above 7.5 billion US dollars during August to December 2019.

“With the US Dollar expected to weaken during the 2H 2019, we expect LKR to be supported by lower imports amidst lack of consumer demand,” First Capital said in a research note.

“In SL we expect the improving external environment and strong foreign reserve position to favour in order to maintain the current low yields over the next 6 9 months.”

First Capital Holdings PLC is an investment bank and is the pioneer non-bank affiliated Primary Dealer in Treasury Bills and Bonds in Sri Lanka. With a track record of over 25 years, the Company was the first licensed primary dealer appointed by the Central Bank and is also the only listed and rated primary dealer in Treasury Bills and Bonds in Sri Lanka
First Capital delivers the only source for fixed income research in the local financial services industry. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis.