Bloomberg First Word (BFW) Date: Sep 27 2018  9:18:37

Bonds Seen Pressured by Higher Borrowing Costs: Inside Sri Lanka

By Anusha Ondaatjie

   (Bloomberg) — Sri Lanka’s bond prices may drop after the government’s costs of borrowing jumped at an auction Wednesday.

  * Central bank sold 1.8b rupees ($11m) of 91-day bills at 8.56%, up from 8.07% at previous auction, and 3.30b rupees of 364-day notes at 9.51% vs 9.05%

  * The bank offered a total 8b rupees of bills, with 5.1b rupees of bids accepted

  * “Liquidity is short and we think the yields have room to move up at least another 20 bps,” says Dimantha Mathew, head of research at First Capital

  * The Fed’s rate hike Wednesday had already been priced in; that suggests foreign outflows from the bond market will slow, limiting the drop in prices and the rupee’s decline

  * Yield on 10.2% govt bonds due July 2023 rose 5bps Wednesday to 10.70%, data compiled by Bloomberg show

  * USD/LKR steady at 168.95 after rising to a record 169.10 on Wednesday

  * Overseas investors sold a  net $0.3m of local stocks on Wednesday, taking outflows for this month to $8.9m: exchange data