ECONOMYNEXT – Sri Lanka has sold 77.7 billion rupees of 4 to 13 year bonds at an auction Tuesday with yields soaring over 100 basis points as a balance of payments crisis triggered by rate cuts and failed Treasuries auctions took hold.
The debt office sold 10.2 billion rupees of bonds maturing on 2020 at an average yield of 12.78 percent sharply higher than the 11.87 percent on an auction on March 17.
About 21.4 billion rupees of 2025 bonds were sold at 13.80 percent, sharply higher than the 11.05 percent yield of 01.08.2025 bonds sold on March 2015.
The debt office sold 17.0 billion rupees of 2026 bonds at 13.93 percent, up from 11.14 percent on an auction on February 05.
In 2030 bonds, the debt office sold 28.9 billion rupees of bonds at 14.23 percent, higher than the 11.66 percent on February 2015, with a settlement date on April 01.
Cut off yields are estimated at around 25 basis points higher on some maturities.
There are 82.5 billion rupees of bonds maturing on April 01, with coupons taking it to an estimated to 97 billion rupees.
Though long term bonds have been sold at high rates, the central bank has printed money to repay Treasury bills and generated a balance of payments crisis, undermined the credibility of the peg, scared away foreign investors and also earned a credit downgrade.
The rupee has fallen from 131 to the US dollar in January to about 149 so far. A monetary policy announcement is due later today.
Though market participants are saying a rate hike is necessary, going by its recent record, some analysts say they would not be surprised if the monetary authority held rates and continued to print more money. (Colombo/Mar29/2016)