Sri Lanka to borrow Rs30bn in up to 20-year bonds

COLOMBO (EconomyNext) – Sri Lanka will sell 10 billion rupees of 7, 10, and 20 year bonds, to raise 30 billion rupees, the state debt office said.

The debt office is offering bond 7 year bonds maturing on 01, July 2022 with a coupon of 11.20 percent which is an existing series.

The 10 year bonds will mature on 15 March 2025 (coupon 10.25 percent) and the 20-year bond will mature on 15 March 2035 (coupon 11.5 percent).

Dealers expect rates to edge up, following an increase in Treasury bill yields last week.

The 7-year bond is quoted around 8.10/30 percent, though not actively trades. Bond markets are largely inactive.

Central Bank Governor Arjun Mahendra has said the debt office will end the practice of selling bonds outside the auction process, which is less transparent than an auction and is said to have left room for corruption.

The market is however was badly shaken by a 30-year auction Friday where 10 times to original offer was accepted amid allegations of insider dealing.
Analysts also say the government should try to issue less long term bonds for the time being, as there is a high degree of uncertainty in the market and instead go for a shorter term maturities for the moment.

Sri Lanka has outlined new spending in a revised budget and a planned dollar bond sale has also been delayed which requires rates to go up but if fiscal policy is expected to get better, authorities should not allow the yield curve to slope steeply upwards, analysts say.

Instead supply should be squeezed on the long end so that the yield curves is flat as possible to reduce fiscal costs especially if gilt yields are expected to fall this year itself, analysts say.





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