Sri Lanka doubles bond coupons to 15.50-pct

Feb 01, 2008 (LBO) – Sri Lanka has more than doubled the coupons on its two year bonds, the government’s debt office said, in a move that will give the government more immediate cash. The debt office offered 750 million rupees of 2-year bonds maturing on January 15, 2010 Friday, with a coupon of 15.50 percent.

On Tuesday Sri Lanka sold the same ‘A’ series 2010 bonds with a coupon of 7.60 percent.

The bonds were sold at an average yield of 18.88 percent, though secondary market trading immediately jumped to around 19.00 percent after the auction.

With a coupon of 7.60 percent the government would get 831 million rupees on every sale of one billion rupees of bonds discounted at 18.90 percent.

With a coupon of 15.50 percent a sale of a billion rupees of bond would net 993 million rupees, dealers said.

Interest outflows would also double every year, with the bonds bearing a semi-annual payment. But that would also reduce the build up of a final settlement liability.

The 2010 bonds were quoted around 18.85/19.00 on Friday and the Central Bank, which runs the debt office was offering bonds on ‘tap’ outside the auction at a fixed price of 18.90 percent earlier in the day.

Foreign hedge funds have been buying into Sri Lanka government bonds since 2007.