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Sri Lanka sovereign bond yields rise

ECONOMYNEXT – Sri Lanka’s sovereign bond yields have risen sharply over the two weeks, amid global volatility while rupee bond holders have also been selling out.

The yield on Sri Lanka’s 10 year sovereign bond maturing on 03/28/2030, had risen to around 16.7 percent from around 7.8 percent in the first week of March and was quoted around 57 cents to the dollar based on Bloomberg data dealers said.

A 5-year bond maturing on 06/03/2025 was quoted around 13.8 percent from around 6.7 percent on March 05, or around 72 cents to the dollar.

Global markets have also been volatile and stock market around the world has been collapsing.

Sri Lanka rupee bond holders have also been exiting steadily.

Rating agencies were also spooked after value added taxes were cut. Sri Lanka’s central bank had also cut rates and made several liquidity injections raising concerns for the rupee.

Sri Lanka has twice paid maturing bonds out of forex reserves without going to the market. However when excess liquidity is injected the central bank is unable to mop up inflows and build forex reserves analysts have pointed out.

Sri Lanka’s private credit is also weak. (Colombo/Mar18/2020)