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Nobly Curve

Central Bank officials say that an initial Rs. 5 bn worth 10 or 12-year bonds will hit the market soon.

rnrnThe bank expects long term investors like insurance companies and the captive funds like EPF and ETF to subscribe to the issue.

rnrnldblquote We have spoken to the investors like insurance companies and provident funds and we will be issuing the long term bonds in near future, dblquote Dharma Dheerasinghe of the Public Debt Department of the Central Bank said at a news conference last week.

rnrnldblquote That will stop the bunching of debt problem we have had in the recent past. dblquote

rnrnAnalysts say that the issue will help develop the long-term yield curve, though five billion may not be enough to create a market determined yield.

The longest tenure currently available is the six-year bond.

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But these issues will virtually double the length of the yield curve.

rnrnThe erratic borrowing habits of the governments, and wildly fluctuating yields have made the risk free yield curve less useful in recent years.

rnrnSome bond issuers have even turned to the weighted average saving rate, which is more stable.

rnrnWith the absence of a scrip-less trading system the public debt department of the Central Bank plans to go with one interest payment per year.rn
The government will issue its first long term bonds within the next two weeks, pushing the risk-free yield curve beyond 10 years.

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