Foreign holding in G-Secs gains 23% following IMF staff-deal 

The week following Sri Lanka firming up the staff level agreement with the International Monetary Fund (IMF) saw foreigners inject higher proportions of rupee securities into their holdings, the highest since the end of June. However, it is yet to be seen if the trend would hold.
According to the Central Bank data, foreigners brought Rs.930 million worth of rupee securities in the week ending 7 September, logging a 23.2 percent increase from the earlier week. 

 With the most recent additions, foreign holdings of rupee bills and bonds amounted to Rs. 4,942.14 million. 
Foreign investors are observing if the debt-strangled economy is committed to serious reforms under an IMF-backed programme.
However, rising dollar yields and the strengthening dollar could pose fresh risks to the continuation of the flow of foreign investments into local bonds.

In the United States, the risk-free return rate is increasing at a rapid pace amidst the US Fed leaning on the continuous increase of the federal funds rate until the inflation shows credible evidence of easing.  
Sri Lanka has seen continued bleeding of foreign investments in its government securities from the beginning of 2015 and the situation has worsened since 2020 when the rating agencies slashed the country’s sovereign rating.

At its peak in January 2015, foreigners held Rs.453 billion worth of rupee bonds which at the time was equivalent to US $ 3.5 billion.