Sri Lanka government dollar bond buyers demand higher yields and shorter maturities

Sept 13 (LBO) – Buyers of Sri Lanka government dollar bonds have demanded higher yields, and shorter maturities, at the latest action which closed this week. At the dollar bond auction which closed this week, weighted average yield for 2-year bonds were 144.06 basis points above the London Interbank Offered Rate (LIBOR) while the premium for 3-year bonds was 157.73 basis points, the government’s public debt office in the Central Bank said.

At the last 3-year bond auction in August the government raised 175 million 3-year dollars at only 138.5 basis points above six month LIBOR.

Demand for the 3-year bond was also less than the 2-year one.

“Reflecting investors’ preference for shorter end of the yield curve, the 2 year bond was oversubscribed heavily by 148 percent with bids amounting to US Dollars 124.3 million, while the 3 year bond was oversubscribed by 75 percent, with bids amounting to US Dollars 87.5 million, the Superintendent of Public Debt said in a statement.

The government originally offered 50 million dollars in each maturity, but had accepted 70 million dollar in 2-year bonds and only 35 million dollars in 3-year bonds.

Sri Lanka has so far raised 580 million dollars through dollar bonds which can be bought by foreign citizens, non resident Sri Lankans, Sri Lanka dual citizens, companies approved by the Board of Investment of Sri Lanka, and specified insurance companies. The government has begun relying more on commercial dollar loans, which reduces pressure on domestic interest rates and helps the balance of payments.