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Sri Lanka sovereign bond yields plunge on China swap news

ECONOMYNEXT – Sovereign bond yields plunged and prices rose as investors gained more confidence that the bonds would be repaid, after Sri Lanka’s State Minister for Capital Markets Nivard Cabraal said China had confirmed a 1.5 billion US dollar equivalent swapline.

The yield on Sri Lanka’s 6.25 percent coupon 2021 bond, fell to around 18 percent from 28 percent, after the news, according to Bloomberg Newswires data.

The bid price rose from 92 to 95.

The bid yield on a sovereign bond due in January 2022, where bond holders most expect a default, fell to around 42 percent from 48 percent. The price rose to 75 cents to the dollar from a previous 72.

Sri Lanka has insisted that it would not default and would keep its unblemished record of repaying debt.

Related

China approves US$1.5bn dollar swap for Sri Lanka: Minister Cabraal

Minister Cabraal had said Sri Lanka keep efforts to boost dollar inflows to 32 billion US dollars in 2021 and generate 4.4 billion US dollars to repay debt and be solvent.

Sri Lanka’s central bank has been buying up rupee government securities and injected liquidity failing to maintain domestic solvency, triggering forex shortages.

Sri Lanka’s domestic bond yields also fell on the news and also a domestic bond sale where 54 billion rupees out of 60 billion rupees offered was sold. (Colombo/Mar11/2021)

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