The Central Bank of Sri Lanka was seen tightening its monetary policy stance by increasing its policy rates by 100 basis points at its announcement on Friday, the sharpest increase since January 2001. Its Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) stand at 6.50% and 7.50% now.
At the weekly Treasury Bill auction leading to the monitory policy announcement, demand dipped further as its total accepted volume fell to 65.37% of its total offered volume in comparison to its previous weeks 80.70%. The weighted average rates were seen spiking as well with all three maturities exceeded the 9.00% psychological level for the first time since April-May, 2019.
The Colombo Consumer Price Index (CCPI) or inflation for the month of February increased for a fifth consecutive month to 15.1% on its point to point, when compared against its previous month’s figures of 14.2% while its annual average increased as well to 7.9% from 6.90%.
Nevertheless, activity in the secondary bond market remained rather low during the week ending March 4 as a majority of market participants were seen on the side lines. Limited trades were seen on the liquid 01.08.25 maturity at levels of 12.95% to 13.00% while the June 3, 2022 bill was traded within the range of 8.85% to 9.95% in the secondary bill market.
In money markets, the base rate change saw the weighted average rate on overnight call money and repo increasing to 7.45% and 7.50% on Friday against its previous three days average of 6.48% and 6.50%.
(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)
Courtesy: Wealth Trust Securities Ltd