Foreign investor holdings of rupee-denominated government debt rose to LKR 176.6Bn, extending a steady multi-week climb even as foreign investors continued trimming equity positions.
Foreign investor holdings of Sri Lanka’s rupee-denominated government securities rose 4.54% week-on-week to LKR 176,561Mn, according to the latest Central Bank data, extending a steady build-up over recent weeks.
The increase continues a broader climb in foreign participation in local debt markets. Holdings have risen from LKR 121,331Mn in early June to LKR 176,561Mn currently, with the pace of accumulation picking up notably from LKR 136,859Mn on 2 July to LKR 168,895Mn on 9 July, before settling at the current level.
The buying interest was concentrated in specific maturities during the latest session, with the 01.07.2030 bond attracting particular attention from foreign investors amid a broadly stable yield curve. Yields on government securities firmed across the mid-to-long end of the curve over the week, with the 5-to-7-year segment rising 30 basis points, which may be shaping the relative appeal of specific maturities to foreign buyers.
The rise in foreign bond holdings stands in contrast to continued foreign selling in equities. Foreign investors were net sellers of Colombo Stock Exchange shares in the latest session, posting an outflow of LKR 188.62Mn, with month-to-date equity outflows at LKR 3,190.2Mn and year-to-date outflows at LKR 37,298.2Mn.
On the currency front, the rupee depreciated marginally against the US dollar, closing at LKR 336.42, compared with LKR 336.35 previously.
Business Impact
Rising foreign holdings of government debt is a signal of continued external confidence in local fixed income at prevailing yield levels, even as the same investor base pulls back from equities. For businesses and policymakers, sustained foreign appetite for government securities is a relevant factor in assessing capital flow dynamics and their potential bearing on the rupee. The divergence between debt and equity flows also suggests foreign investors are currently drawing a distinction between the two asset classes rather than adopting a uniform stance on Sri Lankan markets.
Key Numbers
| Metric | Value |
|---|---|
| Foreign Holding of GSecs (Current) | LKR 176,561Mn |
| Foreign Holding of GSecs (WoW Change) | +4.54% |
| Foreign Holding (Early June) | LKR 121,331Mn |
| Foreign Holding (9-Jul) | LKR 168,895Mn |
| Net Foreign Equity Outflow (Daily) | -LKR 188.62Mn |
| Net Foreign Equity Outflow (MTD) | -LKR 3,190.2Mn |
| Net Foreign Equity Outflow (YTD) | -LKR 37,298.2Mn |
| USD/LKR | 336.42 |
Source Attribution
Source: Central Bank of Sri Lanka statistics and publicly available market information.