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Sri Lanka Development Bond auction gets few bids, balance offered on tap

ECONOMYNEXT – Sri Lanka has sold 43.5 million US dollars in a 200 million dollar auction of Sri Lanka Development Bonds at yields ranging from 6.89 percent for one year and 6.05 percent for 4 year, and undersold bonds would be offered on subscription, the debt office said.

The debt office sold 39.37 million dollars of 1 year bonds at an average yield of 6.89 percent, 2.53 million dollars of 1-year, 3-month bills at 6.85 percent, 1.6 million dollars of 2 year bonds at 6.92 percent and 0.10 million dollars of 4 year bonds at 6.05 percent.

The 200 million dollar bond auction drew only 62.6 million dollars of bids, leaving it sharply undersubscribed.

The settlement day is January 22.

The debt office which is a unit of the central bank said bonds will be sold through an issuance window (on tap) until 4.15 pm on January 21.

Applications for subscription through the issuance window could be sent to ‘[email protected]’.

Sri Lanka’s domestic dollar yields have moved up sharply in recent weeks amid ‘modern monetary theory’ style money printing despite operating a pegged exchange rate regime.

Some banks have paid around 8 percent for dollar borrowings and domestic rupee rates are now lower than the dollar yield, which is also discouraging exporters from selling forward.

As a result forward fx premiums have inverted. (Colombo/Jan19/2021)

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