MONETABRIEF – Sri Lanka’s rupee was quoted at 238.25/60 in mid-morning trade Thursday fro 328.30/60 to the US dollar in the spot market a day earlier, while bond yields were up on global jitters, dealers said.
Investors have been nervous to buy US long bonds after almost two decades of what macro-economists and the International Monetary Fund calls 'policy support' involving printing money and heedless state spending to boost 'growth'.
Inflation on its own also undermines fiscal metrics by destroying capital and eventually pushing up interest rates while loss of confidence in fiscal policy can also kill demand.
From 2,000 macro-economists (Stiglitz-Bernanke0 first fired the housing bubble by spreading a false scare and cutting rates ending the Great Moderation.
When the housing bubble collapsed, they printed money, misled politicians into heedless spending and the Fed ultimately legitimized excess liquidity through the abundant reserve regime in 2019.
Sri Lanka also does not have a robust monetary operating framework which can withstand external shocks, and the rupee can fall as convertibility is denied to excess liquidity, panicking both forex and bond markets.
Based on the official statements after the latest currency collapse which sent inflation soaring to 8.0 percent, the operating framework can deliver stability only if there are no 'external shocks'.
A bond maturing on 15.12.2029 was quoted at 10.35/40 percent up from 10.30/38 percent.
A bond maturing on 01.08.2030 was quoted at 10.55/60 percent up from 10.48/50 percent. (Colombo/Sept03/2026)