Sri Lanka’s government bond yields climbed on Tuesday, even as the local currency held its ground against the US dollar.
Dealers reported that the rupee closed flat at 336.00/20 in the spot market, maintaining the level seen in previous sessions.
The divergence between the stable exchange rate and rising yields suggests that investors are demanding higher compensation for holding local debt, independent of currency fluctuations.
The move in bond markets comes after a period of relative stabilization for the rupee.
Over the past week, the currency had shown signs of strengthening, trading as tight as 335.25/35 on Friday before settling back near the 336 level.
This recent consolidation has provided a brief respite from the depreciation trends that have plagued the island nation’s economy in recent years.