ECONOMYNEXT – Sri Lanka has sold 83.5 percent of a 50 billion rupee bond auction after ceiling rates were raised to closer to market, data from the state debt office showed.
27.5 billion rupees of 15.03.2031 bonds were sold at a weighted average yield of 10.05 percent which had a ceiling rate of 10.05 percent.
14.2 billion rupees of 15 June 2024 bonds were sold at 8.10 percent, which is the ceiling yield.
The debt office raised a total of 41.78 billion rupees from the market.
An estimated 47 billion rupees of coupons need to be paid.
At an auction on August 30, 92-percent of bonds offered failed to sell.
Sri Lanka started enforcing ceiling yields from the second quarter of 2020.
They became de facto policy rates strung along the yield curve though which liquidity was injected to pressure a currency peg, lose forex reserves and drive the country closer to dollar sovereign default, as soon as private credit picked up, critics have said.
Sri Lanka periodically triggers currency crises by injecting liquidity to undermine the credibility of a pegged exchange rate regime and then blames imports or the trade deficit for the fallout. (Colombo/Sept15/2021)