Sri Lanka sells Rs63bn in bonds; secondary yields up 15 to 20bp

ECONOMYNEXT – Sri Lanka sold 60 billion rupees of 5, 08, 10 year bonds following a 50 basis points rate hike a day earlier, but secondary yields rose only 15 to 20 basis points, far lower than the rate hike, dealers said.

The debt office sold 20.7 billion rupees of 4-year 7-month bonds maturing on 01.03.2021 at a weighted average yield of 12.07 percent after offering 20.0 billion.

A close maturity, (14.07.2021) was last auctioned at 11.67 percent on 12.07.2021 and it was quoted wide around 11.75/12.25 percent before the auction, up from 11.68/72 before the rate hike, dealers said.

But after the auction the bond 01.02.2027 was quoted around 11.90 percent indicating a rise of around 20 basis points.

The debt office sold 20.8 billion rupees of 8-year bonds maturing on 01.08.2024 at an average yield of 12.61 percent after offering 20 billion.

A close maturity (01.01.2024 bond) was quoted wide at 12.25/75 percent before the auction, up from 12.15/25 percent before the rate hike.

After the auction bond was traded around 12.40 percent, indicating an increase in rates of around 20 basis points.

The debt office sold 21.5 billion rupees of 10-year bonds maturing on 01.08.2026 an average yield of 12.86 percent.
A close maturity (01.06.2026) was quoted around 12.50/55 before the rate hike. After trading at 12.90 before the auction, it closed at 12.50/55 percent Friday.

The auctioned 01.08.2026 also closed at a lower 12.65/75 percent.

Around 80 billion rupees of bonds are estimated to be maturing on August 01 without counting coupon maturities. However the debt office also sold 20.3 billion rupees of bonds on July 20.





Central Bank Deputy Governor Nandalal Weerasinghe told reporters earlier Friday that Treasury had indicated that it had cash-flows to repay the bonds.

The central bank said after hiking rates that it did not expect long term yields to move up sharply. There is now a large gap between 01 and 02 year yields, partly due to dealers and banks borrowing overnight from central bank facilities (printed money) to fund portfolios.

The central bank raised its key rate to 8.50 percent from 8.0 percent on Thursday. (Colombo/July28/2016)

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