Sri Lanka, Aug. 24 -- The 2018-2019 foreign exodus from Sri Lanka's government bond markets has picked up speed in recent weeks with total net outflows for the 2018-2019 period now totalling over Rs200bn (US$1.1bn).

In the last week alone foreign institutions withdrew a net US$72mn from Sri Lanka's treasury bond markets amid a second significant rate cut by Sri Lanka's Central Bank. Rate cuts from the CBSL lead to reductions of interest rates on government securities making them less attractive to foreign investors.

With a mere Rs123bn (US$700mn) of foreign institutional investor holdings in Sri Lanka's government bond market, there is not much left to flow out. The Governor of the CBSL Indrajit Coomaraswamy has been on record saying that...