Sri Lanka sells Rs20.7bn in bonds; 2041 bonds at 12.15-pct

ECONOMYNEXT – Sri Lanka has sold 20.6 billion rupees in bond with a 25 year bond maturing in January 01, 2041 sold at a weighted average yield of 12.15 percent, up from 12.09 on January 08.

The debt office sold 10.45 billion rupees of 14 year bonds maturing on 15.05.2030, at an average yield of 11.66 percent after offering only 3.0 billion rupees.

The debt office sold 10.25 billion rupees of the 2041 bond after offering 5.0 billion rupees.

Bids for 4-year bonds were rejected.

On January 08, the debt office sold 19.6 billion rupees of 2041 bonds at a weighted average yield of 12.09 percent.

After the auction the yield fell sharply (the price of the bond rose) and a state managed fund was seen buying them as yields fell to around 10.80 percent giving large profits to primary dealers who bought at the auction and shortly after.

The bond prices started to fall (yield started to rise) from around January 27 when another long bond auction announced.

The 2041 bond closed on 11.75/12.10 on Wednesday. After the auction on Friday the bond was quoted 11.60/75 percent dealers said.

High volatility had been observed in several longer tenor bonds in recent auctions.

There has been concern that the high volatility of bond yeilds, which gives opportunities dump bonds at low yields (high prices) on state managed funds.

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While some volatilty is inevitable when auctions are conducted Sri Lanka also accepts higher than offered volumes at bond auctions, which allows auctions to be rigged, by giving misleading information to the broader market, critics have said. (Colombo/Feb 05/2015 – operning para corrected to 12.09 on January 08 from January 01)
 

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