Sri Lanka bond yields down after auction
ECONOMYNEXT – Sri Lanka’s bond yields were marginally lower on Wednesday after an auction a day earlier, which saw rates fall, dealers said as the country emerges from a balance of payments crisis, triggered by a Central Bank-accommodated budget deficit.
The debt office sold bond maturing on 15.12.2021 at an average yield of 11.14 percent, down from 11.37 percent, for a close maturity of 01.08.2021 paid at an auction on June 13. The bonds were quoted at 11.15/18 percent on Wednesday.
Bonds maturing on 15.05.2023 were auctioned at an average yield of 11.21 percent, down from 11.38 percent on June 13. The bond was quoted at 11.20/25 percent levels on Wednesday, dealers said.
Bonds maturing on 15.03.2025 were auctioned at an average yield of 11.30 percent on Tuesday, down from 11.41 on 13 June. The bonds were qutoed at 11.25/35 percent on Wednesday.
Bond maturing on 15.06.2027 were auctioned at an average yield of 11.37 percent on Tuesday, down from 11.49 percent on June 13.
The debt office, which is a unit of the Central Bank, offered 16.0 billion rupees in 2021 bonds and sold 14.59 billion, offered 19 billion rupees in 2023 and sold 19 billion, offered 15 billion rupees in 2025s and sold 15 billion and offered 15 billion rupees in 2027s and sold 15 billion.
Bond rates are falling in line with credit demand, with the debt office no longer accepting more bids than offered for sale.
The practice of accepting more bids that offered tends to mislead markets and keep rates higher than required when Sri Lanka emerges from a balance of payments crisis, delaying a recovery, analysts who have studied the phenomenon say.
The Central Bank usually triggers balance of payments crises by rejecting bonds and bill auctions, and buying up bills with printed money. It has been engaging in the practice for over half a century, generating economic chaos, critics say. (Colombo/July12/2017)