CBSL commences monetary easing cycle

Slashes policy rates by 250 basis point Secondary market yields follow suit Rupee dips marginally

The Central Bank of Sri Lanka in an a g g r e s s ive move was seen decreasing its monetary policy rates by a c o n s i d e r abl e 250 basis points ( 2.50%) at its mone t a ry p o l i cy announcement ye s t e r d ay. The new Standing Deposit Facility Rate ( SDFR) and Standing Lending Fa c i l i t y Rate ( SLFR) stands at 13.00% and 14.00% respectively now.

The activity levels in the secondary bond marke t increased following the policy announcement as yields on the liquid maturities of 01.07.25, 15.05.26, 2027’s ( i. e., 01.05.27 & 15.09.27) and 01.07.32 were seen decreasing to intraday lows of 26.75%, 24.60%, 24.25%, 24.00% and 20.00% respectively against its previous day’s closing levels of 28.50/ 30.00, 28.00/ 29.00, 26.60/ 90 and 21.75/ 22.75. The bullish sentiment led to the latest 182- day bill changing hands at a low of 19.00% as well.

The total secondary market Treasury bond/ bill transacted volume for 31 May 2023 was Rs. 127.63 billion.

In money markets, the DOD ( Domestic O p e r a t i on s Department) of the Central Bank was seen injecting an amount of Rs. 50 billion on an overnight basis by way of a Reverse Repo auction at a weighted average of 13.61% as the net liquidity shortfall stood at Rs. 153.35 billion yesterday. The weighted average rate on overnight call money and repo stood at 14.00% each.

Forex Market

In the Forex market, the USD/ LKR rate on spot contracts depreciated marginally yesterday to close the day at Rs. 292.50/ 295.50 against its previous day’s closing level of Rs. 290.00/ 291.00 on the back of continued selling pressure on the dollar.

The total USD/ LKR traded volume for 31 May was $ 117.33 million.

(Re ferences : Central Bank of Sri Lanka, Bloomberg E- Bond trading platform, Money broking companies)