A surge in foreign currency reserves and stability in all other indicators may significantly strengthen macro economic conditions and reduce volatility of interest rates says First Capital Reserch. “Accordingly we maintain our yield curve expectations in the bond market for the next couple of months.
“In our last fixed income report on Jun 24, 2019, we upgraded our expectation in the First Capital Economic Health Score, primarily supported by the successful issuance of USD 2 billion sovereign bond and possible further issue of additional bonds amounting to USD 2.5 billion to manage debt in 202” the report added.
Yields dipped during last few weeks, primarily led by Sri Lanka’s successful International Sovereign Bond (ISB) issuance of USD 2 billion offering tenors of 5 and 10 year. Following the issuance, foreign reserves exhibited a significant improvement reaching USD 8.8 billion as at end of June 2019. We expect reserve to be maintained above USD 7.5 billion during August to December 2019.
“We recommend investors to reduce overall portfolio exposure to 45% from 60%. We recommend cutting 2021 and 2022 maturities of the carrying portfolio amidst the significant reduction in yields while we recommend an increase in 2023 and 2024 maturities in the trading portfolio amidst the slight rise in yields.”
“We recommend cutting 2021 and 2022 maturities of the carrying portfolio amidst the significant reduction in yields while we recommend an increase in 2023 and 2024 maturities in the trading portfolio amidst the slight rise in yields.”
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