Foreigners sell US $ 28mn worth govt securities in week after rate cut

REUTERS: Foreign investors sold a net US $ 28.2 million worth of Sri Lanka government securities in the week ended April 22, following a 50 basis point cut in the Central Bank’s policy rate.

Central Bank data released yesterday showed foreign holdings of government securities fell 0.8 percent to Rs.461.63 billion (US $ 3.47 billion) in the week.

“Foreign investors have been taking profits after the rate cut,” a currency dealer said on condition of anonymity. During the week after the April 15 rate cut, yields on T-bills fell between 37 to 48 basis points (bps) and yields on T-bonds fell 40-45 bps.

Fitch Rating Agency on Wednesday said heavy external debt repayments have led to a drawdown on international reserves, raising concerns about external liquidity, particularly in the face of expected monetary tightening by the US Federal Reserve. Finance Minister Ravi Karunanayake defended the rate cut, however.

“We are highly indebted by the last government. Who is paying the interest prices? If you have higher interest rates, you will have to pay higher cost on the debt services,” Karunanayake told Reuters on Saturday.