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Sri Lanka Treasuries yields fall 950bp over past year: Central Bank

Nov 11, 2009 (LBO) - Sri Lanka's Treasury bill yields have fallen 947 to 950 basis points at primary auctions over the past year, helped by easier monetary policy, foreign investment into Treasuries and lower inflation, the Central Bank said.

At Wednesday's auction 3-month yields fell to 7.
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73 percent, the 6-month yield fell 22 basis points to 8.
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80 percent and the 12-month yield fell 12 basis points to 9.56 percent, at Wednesday's auction, the government's debt office said.
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But over the past two weeks bond yields have edged up.


Dealers say the market has been spooked by government promising salary increments and expanding state recruitment ahead of national polls, renewing fears of high deficit spending.


In late October all maturities of bonds traded below 10.00 percent dealers said.

But by this week bonds maturing from 2014 onwards (4-year bonds) have tended to trade at 10 percent or higher with 6-year bonds being quoted at 10.

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30/40 levels.

Dealers say there seems to be a portfolio shift towards shorter term maturities and some bondholders were also looking to book profits for the last quarter.

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Some foreign banks were also buying bills instead of central bank securities to park short term money.
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Market participants say bonds also spiked briefly when they fell to around 13.0 percent earlier in the year, before continuing down.

The central bank has said it was looking to keep inflation at around 3.

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5 percent this year and 5.0 percent in 2010.

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