June 23, 2008 (LBO) – Sri Lanka sold 2-year bonds worth 230 million US dollars priced at 294 basis points above the London Interbank Offered (LIBOR) rate, the government’s debt office said. At the same time 250 million dollars of old Sri Lanka Development Bonds also matured, indicating a net pay down of 20 million dollars in SLDBs.
But the public debt office, which is part of the Central Bank, called for only 200 million dollars in bids, amidst tough conditions for bonds internationally and tight conditions for dollar liquidity at home.
The government originally offered for sale 125 million US dollars in two year bonds, 50 million US dollars in 3-year bonds and 25 million dollars in 5-year bonds, but only sold 2-year bonds.
Earlier in the month the government also raised 3-year money through a syndicated loan with an annual put option at 250 basis poins above LIBOR.
The debt office said 310 million dollars worth of bids had been recieved for the SLDBs. The LIBOR rate on Monday was 3.180 percent.
At a time when credit spreads are rising analysts say the government had capped the sovereign risk premium at 294 basis points above LIBOR.
The sovereign risk determines the floor rate for private borrowings in dollars. Sri Lanka’s economy is getting increasingly dollarized with the government encouraging the private sector to borrow dollars.