Indian interest for Sri Lanka’s sovereign bonds; Central Bank

November 01, 2006 (LBO) – Sri Lanka Wednesday, threw open the government bond market for overseas investors to buy rupee-denominated sovereign debt for the first time beginning today, the Central Bank said. Prior to this, overseas investors were only allowed to invest in equities and dollar bonds issued by the government, also known as Sri Lanka Development Bonds.

Overseas investors, which include mutual funds and regional funds approved by the Securities & Exchange Commission of Sri Lanka (SEC), companies incorporated outside Sri Lanka and citizens of foreign states are now allowed to invest in treasury bonds, the bank’s Public Debt department said.

“We are opening 5-percent of the government bond market for maturities over two years for foreign investors. They have to hold it for at least a year before selling it to a resident Sri Lankan, but that clause doesn’t apply if its sold to another foreign investor during a one year period,” Central Bank’s superintendent of Public Debt Chandra Premaratne said.

According to Central Bank figures, total outstanding treasury bond portfolio now stands at 875.4 billion rupees as at end October.

“Accordingly, the amount now offered to non-residents would be 44 billion rupees,” she said.

“We have got some initial interest from few Indian investors who say they see arbitrage opportunities by investing in Sri Lankan rupee-denominated bonds,” the bank’s Assistant to the Governor, H N Thenuwara said. Overseas investors need to open a rupee account or a Treasury Bond Investment External Rupee Account (TIERA) to route their investments, the bank said.