Monetary policy rates increases for fifth time

• 10.00% increase in rates overall
• Secondary market bill rates dip; bonds stagnant

By Wealth Trust Securities 

The Central Bank of Sri Lanka resumed its monetary tightening stance by raising its monetary policy rates for a fifth time since August 2021 at its fifth review meeting for the year 2022 which was announced yesterday. 

An increase of 100 basis points saw the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) advance to 14.50% and 15.50% respectively accumulating a total increase of 1000 basis points or 10.00% since August 2021.

The secondary bond market continued to remain inactive while buying interest in the secondary bill market saw October 2022 to June and July 2023 maturities trading at levels of 27.00% to 29.25%.

The total secondary market Treasury bond/bill transacted volume for 6 July was Rs. 17.38 billion.   

In money markets, the weighted average rates on overnight Call money and REPO stood at 15.50% each while an amount of Rs. 752.22 billion was withdrawn from Central Bank’s Standard Lending Facility Rate (SLFR) of 15.50%. However, the net liquidity deficit stood at Rs. 491.46 billion yesterday as an amount of Rs. 260.76 billion was deposited at Central Bank’s Standard Deposit Facility Rate (SDFR) of 14.50%.

Furthermore, the Domestic Operations Department (DOD) of the Central Bank of Sri Lanka was seen injecting an amount of Rs. 75 billion by way of a 62 day Reverse Repo auction at a weighted average rate of 26.52%, valued today.

Forex market 

In the forex market, the middle rate for USD/LKR spot contracts depreciated marginally to Rs. 359.82 yesterday against its previous day’s closing level of Rs. 359.8167.

The total USD/LKR traded volume for 6 July was $ 9.20 million.  

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