Sri Lanka Treasury has to decide whether to use once-in-150-year chance

ECONOMYNEXT- Sri Lanka’s Treasury would have to decide whether to make use of unusually low interest rates to borrow from international markets, an official said, as US 10-year Treasuries fell to a 150-year low due to the spread of the coronavirus.

Senior Deputy Governor Nandalal Weerasinghe said the Treasury would have to take a decision on moving the borrowing schedule forward.

Sri Lanka last sold 2 billion US dollars in five and ten year sovereign bonds in June 2019. The five year bonds were sold 460 basis points above its US equivalent, while the ten year sovereign bond was sold 553 basis points above the US Treasuries yield which was then trading at 2.02 percent.

On March 03 2020, the US Treasuries yield fell to 0.96 percent, which was a 150-year low, and by March 05, the yield had fallen to 0.82 percent, Bloomberg Newswires said,

It is not clear how long the rates will last. US yields fell as the Fed cut rates and investors flooded to ‘safe haven’ assets as a coronavirus scare roiled global financial markets.

Sri Lanka has a so-called ‘Active Liability Management Law’ which allows the government to borrow more than the annual requirement to build buffers or repay debt early when market rates are friendly.

Sri Lanka has to repay 4.8 billion US dollars in foreign borrowings in 2020 amid a peak in the foreign debt cycle. (Colombo/Mar05/2020)

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