economynext: Foreign investors sold down Rs.17 billion of bonds (US $ 125 million) in the week to August 05, 2015, official data showed, extending a trend seen since a rate in April and pressure on the country’s currency peg due to growing domestic credit.

Foreign investors have sold down Rs.81 billion (UA $604 million) of rupee bonds since the April rate cut.

Some foreign investors also sold out in the last quarter of 2014, but there was renewed buying in the first quarter.

The Central Bank has said it is cutting rates because inflation is low as if they are actually targeting a domestic monetary anchor when in practice 
they target the exchange (an external anchor).

Sri Lanka has also sold dollar bonds in the domestic market this year, but tenors have been shrinking after April.

The government also sold a650 million dollar 10-year bond in June.

The new administration has ratcheted up spending after January 2008 sending domestic borrowings soaring but has did not raise rates. 

Instead it released tens of billions of rupees of excess liquidity firing credit, consumption and imports and cut rates in April 
spooking bondholders.