Sri Lanka sovereign bonds plunge ahead of debate on constitutional amendment

ECONOMYNEXT – Sri Lanka’s sovereign bond prices tumbled (yields rose) ahead of a parliamentary debate on expanding the powers of the president as the island’s highest court giving an amendment the greenlight with changes to some clauses.

Sri Lanka’s parliament is starting a two day debate which will see the abolition of a constitutional council which approves judges and senior officials and will allow the president to dissolve parliament early.

The Supreme Court said changes to further strengthen the immunity of the president, as well a blocking the ability of the Commissioner of Elections to give orders to public officials will require a referendum.

Thirty nine civil liberties and opposition groups filed petitions challenging the constitutional amendment saying it will take the country on the path to a dictatorship.

The government says the changes are needed to stop a conflict between the Prime Minister and President.

The opposition protested the allocation of two days saying the constitution change, which has far reaching implications to the country.

Sri Lanka sovereign bond maturing on July 27, 2021 plunged from 88 cents to the dollar to 81.6 cents to the dollar on October 20, the day Speaker announced the court decision was in parliament, data from Bloomberg Newswires show.

The yield on the bond soared from around 25 percent to 37 percent.

Sri Lanka’s bond prices were rising after the government repaid a billion dollar bond in the first week of October.

Bond also fell after Moody’s downgraded Sri Lanka’s credit to Caa1 (CCC+). But the fall on September 20 was bigger. Other bonds also fell.

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Sri Lanka sovereign bond yields rise after constitutional amendment release

Sri Lanka bond prices started to fall steeply in March 2020 with the onset of a global Coroanvirus crisis but then improved.

Bond prices gained steadily (yields fell) until September 03 when the bill to change the constitution was
published, and reversed direction and stabilized for a while after the billion dollar bond was repaid. (Colombo/Oct21/2020)

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