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Sri Lanka development bond yield overtakes rupee Treasuries at auction

ECONOMYNEXT – Sri Lanka has successfully sold 100 million US dollars of dollar denominated bonds which had drawn interest from bidders compared to under-subscribed earlier auctions, while rupee Treasuries yields plunged below dollar yields.

Sri Lanka sold 50 million dollars of 7 month bills at an average yield of 5.70 percent fixed, with 63.13 million dollars of bids coming in.

At Wednesday’s auction rupee 12-month rupee Treasury bills were sold at 5.66 percent, plunging 96 basis points from a week earlier.

Six-month bills were sold at 5.54 percent down from 6.30 percent a week earlier.

Sri Lanka has printed unprecedented amounts of money since February and slapped import and exchange controls. However private credit growth also plunged in April.

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The central bank sold 32.72 million US dollars of 1-year 2-month bills d to yield 6.67 percent, with 45.48 million dollars of orders coming in.

A rupee bond maturing on 01.08.2021 bonds (1-year 2-months) was traded at 5.40 percent on Thursday.

8.4 million dollars of 1 year 9 month bills were sold at 6.74 percent, with 16.61 million dollars of orders coming in.

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A rupee bond maturing on 15.12.2022 (30 months) was quoted at 5.70/75 percent.

The central bank also sold 8.88 million US dollars of 4 year 7 month bills at 6.87 percent, after getting 18.88 million US dollars of bids.

A rupee bond maturing on 01.05.2025 (5 years) was quoted at 6.55/60 percent.

Sri Lanka’s banking system was short of dollar liquidity at the height of the Coronavirus panic with risk perceptions rising.

Meanwhile Sri Lanka’s sovereign bonds were also steeply discounted. A sovereign bond maturing on October is quoted around 25.9 percent according to Bloomberg data, improving from around 88 percent.

Sri Lankan banks were also asked to confirm letters of credit from third parties by some foreign exporters. (Colombo/June25/2020)