Sri Lanka government securities see shifts in foreign holdings

Foreign holdings of Sri Lankan rupee-denominated government securities showed conflicting trends during the week ending September 18. One report indicates a 1.31% week-on-week increase in foreign holdings, bringing the total to LKR 213.4 billion. This rise occurred alongside increasing yields on government securities, which rose between 18 and 55 basis points, potentially making local debt more attractive to international investors.

Conversely, other data suggests a shift in investor behavior, noting that offshore investors net sold rupee bonds worth approximately LKR 7,302 million (US$22.5 million) during the same period. This marked the first divestment in 14 weeks, following a 13-week streak of purchases. This outflow is attributed to the depreciation of the rupee, which has faced pressure from increased imports and geopolitical tensions in the Middle East. The rupee closed at approximately LKR 332.13 against the US dollar.