The Finance Ledger

Interest rates are a crucial element of economic performance and key instruments in monetary policy. The term structure of interest rates, which is commonly visualized with a yield curve, describes how government bond yields differ from their time to maturity. This structure indicates inflation, economic growth and the stance of monetary policy.  Before we dive into the term structure of interest rates, it is important to understand some foundational concepts. Spot Rate: The rate of return earned when the investor buys and sells the bond without collecting coupon payments. This is extremely common for short-term traders and market makers.  Yield to Maturity (YTM): T he total rate of return that will have been earned by a bond when it makes all interest payments and repays the original principal What is the Term Structure of Interest Rates? It represents the relationship between interest rates (or yields) on debt instruments that have the same credit quality but different matur...

  Annexure 01 The central bank of srilanka currently has a target level of inflation of 5% and this implies that it would like the price increases to be around that level deputy minister Anil Jayantha Fernando told the current target was pegged on the previous performance and, it may change in the future when necessary the existing deal on this target will expire in 2026. But srilanka had lower inflation rates, it is below 5 percent, which the minister said, is not an issue as it benefits the households and businesses. Nevertheless, critics believe that this target has brought a lot of issues throughout the years. There have been numerous currency crises in the country since 2012. The rupee has fallen, food prices have increased, and real wages have declined. Such problems disappointed the citizens with political instability. Printing of money as a way of funding government expenditures was also one of the causes of these crises, which led to inflation and depreciated the rupee. Th...

T itle: Sri Lanka rupee weakens against dollar, bonds flat Date of Publication : Friday, July 18, 2025, 5:08 PM Source : EconomyNext - http://www.economynext.com/ By K.M.S.K. Herath –(236047D) Brief Summary July 18, 2025, was one of those days when Sri Lanka's financial market had reflected prudent stability. The rupee depreciated very little compared to the US currency, while government bond yields remained unchanged, indicating firm investor confidence. This is indicative of Keynes' Liquidity Preference Theory that interest rates equilibrate when cash holdings and investment in bonds are in equilibrium. The fact that there were no dramatic changes in bond yields is indicative of equilibrium between money demand and money supply. Additionally, this tranquility represents investor trust in the Central Bank's monetary strategy, with no anticipation of prompt alterations. Even with slight exchange rate fluctuations, the market stayed stable without major changes ...