Sri Lanka narrows risk premium on 10-year sovereign bond

ECONOMYNEXT – Sri Lanka has narrowed the risk premium charged over the US 10-year yield in its latest 1.5 billion US dollar bond sale, which drew orders over 11 billion US dollars.

The bond was priced at 6.20 percent, sharply lower than the initial price guidance of 6.625 percent.

"This clearly reflects investors’ continued confidence in Sri Lanka and their positive outlook on the Sri Lankan economic growth story," Sri Lanka’s central bank which sells bonds on behalf of the Treasury said.

"The transaction was undertaken on the back of a strong market window post the Federal Open Market Committee minutes release and ahead of the Nonfarm payroll and the French elections."

Sri Lanka last sold 10-year bond on July 2016, 2016 priced at 6.825 percent. On July 11, the US 10-year bond yield fell to 1.43 percent, indicating a risk premium of 5.39 percent at the time.

The 10-year US yield is now about 2.35 percent, indicating a risk premium over the US yield of only 3.85 percent.

Sri Lanka went to the market armed with a staff level agreement with the International Monetary Fund with a promise to enact a new income tax law, which has not gone through a public consultation or white paper.

Only a few tax consultants had seen the draft.

The process of enacting the income tax law and the way taxes are generally raised in Sri Lanka is seen by freedom activists as symptomatic of liberties lost by the citizenry to arbitrary actions of the elected ruling class and bureaucrats over several decades. (Colombo/May06/2017)





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