Foreign investors sold a net Rs. 2.8 billion (US$8.5 million) of Sri Lanka rupee bonds in the latest week, Central Bank of Sri Lanka (CBSL) data showed.
It was the first week of net foreign selling in four weeks. Analysts said investors sold amid slight downward pressure on the rupee.
Net outflows from rupee bonds now stand at Rs. 13.8 billion over the last six weeks. Even so, foreign investors have put about Rs. 58.3 billion into local currency bonds so far this year, after a net inflow of Rs. 71.5 billion last year.
The rupee has fallen 6.7 percent against the US dollar through 27 October this year. It closed at 332.52/60 to the dollar in spot one-week trading on Wednesday, dealers said.
At Wednesday’s Treasury bill auction, Rs. 86.48 billion of bills were sold out of Rs. 100 billion offered, according to the Public Debt Management Office. The three-month yield rose 2 basis points to 9.34 percent, while the six-month yield stayed at 9.44 percent and the 12-month yield at 9.95 percent. The bond maturing on 15 September 2029 closed flat at 11.08/15 percent.
Background
The rupee had been steady for more than three years before a sharp depreciation in May. The Central Bank attributed that move to higher oil and vehicle imports during a continuing conflict in the Middle East. Globally, investors remain cautious about economic growth because of the latest escalation in the region.
The rupee stabilised after the Central Bank raised its key policy rate by 100 basis points in May to curb inflationary pressure from higher demand. Before that, the bank had kept its key rates steady since May 2025, after cutting them by 825 basis points over 24 months from June 2023. Foreign investors had been buying rupee bonds during that period.
Inflation has also risen over the last six months, following a fuel price increase of nearly 50 percent. The government raised fuel prices in the last week of September, after reducing them in June and August.
What it means
A weaker rupee raises the rupee cost of imported goods, including fuel and vehicles, which can feed into consumer prices. For Sri Lankans abroad sending money home, a weaker rupee means each dollar converts into more rupees, though the same movement raises costs for families in Sri Lanka.
Weekly bond flows are one of the figures dealers and analysts watch for signs of pressure on the currency. The Central Bank publishes the data every week.
