Sri Lanka rupee dollar swaps turn positive at the short end

Sri Lanka’s short end swap rates turned positive after dollars flowed into banks from government debt repayments, thought the interbank market for outright trades is mostly inactive, while bond yields were mostly flat, market participants said.

The kerb market for US dollar was around 222.70/223.50 rupees, traders said.

In the swap market spot/1 month was quoted at 00/60 cents positive for the first time this week since.

Spot/2 months was 00/05 positive

Spot/3 months was negative 15/00

Spot/6 months was -300/-200

Spot/12 months was -650/-500

Sri Lanka’s forward rates inverted in late 2020 as downgrades made it harder for banks to borrow abroad and counterparties cut lines. Authorities were unable to fully roll over Sri Lanka Development Bond maturities.

This week a billion dollar bond was repaid, with 310 million dollars to come back to resident holders.

Sri Lanka’s interbank forex markets are not allowed to deal above 200 to the US dollar and import customers are not allowed to be given dollars above 203 to the US dollar in curbs announced after money printing triggered forex shortages.

However parallel markets have developed, with foreign and some smaller banks paying higher rates of around 206 for negotiated deals.

The central bank’s indicative spot rate was 199.9033 on July 28, down from 199.9000 on July 28.

The buying rate for telegraphic transfers was 197.6023 and the selling rate was at 202.8977 on Thursday from 197.9023 and the selling rate was at 202.8977 on Wednesday

In bond markets, short tenor gilt yields were steady while the long tenors remained unchanged.

A 2-year bond maturing on 15.12.2022 closed at 5.65/75 per cent down on Thursday, from 5.68/75 on Wednesday.

A bond maturing on 15.11.2023 closed at 6.35/38 per cent on Thursday, steady from 6.35/40 per cent at Wednesday’s closing.

A bond maturing on 1.12.2024 closed at 6.85/88 per cent Thursday, up from 6.78/87 percent on Wednesday.

A bond maturing on 01.02.2026 closed at 7.40/50 per cent on Thursday, up from 7.35/50 per cent on Wednesday.

A newly auctioned bond maturing on 01.05.2028 closed at 8.10/20 on Thursday.