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Sri Lanka fails to sell 35-pct of bonds offered at auction

ECONOMYNEXT – Sri Lanka has failed to sell 26.52 billion rupees out of 75 billion rupees of bonds offered at an auction on November 12, data from the state debt office showed.

Under Sri Lanka’s Socialist leaning Sirisena-Maithripala administration dealers were forced to buy bonds at mandated a rates, undermining the auction process in a broad strategy of financial repression deep along the yield curve and jettisoning a ‘bills only’ policy of for open market operations.

The practice had been halted for the time being.

The auction is estimated to have raised enough resources to roll-over maturing debt and coupons as paper, market participants said.

The debt office sold 30.05 billion rupees of 3-year bonds maturing on December 01, 2024, at a yield of 6.32 percent, after offering 40 billion rupees, leaving 24.8 percent unsold.

In 7-year bonds maturing on August 15, 2027, the debt office sold 18.7 billion rupees of bonds at an average yield of 7.01 percent leaving 46 percent of the offer unsold.

The debt office offered a total of 75 billion rupees of bonds and sold 48.7 billion rupees of bonds.

Sri Lanka’s bond yields have fallen in 2020, amid a collapse in private credit and liquidity injections by the central bank despite a widening budget deficit.

Private credit has picked up in August and September, though a Coronavirus outbreak worsened in October, the effect on credit and consumption is not yet clear. (Colombo/Nov13/2020)

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  1. What this does to the country’s credit rating and investor confidence only a dictator will know! Unfortunately, we don’t have dictators in our democracy.

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