Sri Lanka rupee bond yields drop on dollar debt sale

Sept 28, 2010 (LBO) – Sri Lanka government rupee securities yields slipped on news of a successful sale of a 10-year billion US dollar sovereign bond Tuesday, despite market participants discounting the effect earlier, dealers said.

A 10-year rupee bond maturing on 01.08.20 was last sold at an auction at 9.30 percent but the bond is not traded actively in the secondary market, dealers said.

The Sri Lanka rupee is tightly pegged to the US dollar and authorities have allowed it to slowly appreciate it over the past year. On Monday the rupee strengthened to over 112.00 to the US dollars, the strongest since December 2008.

The sport US dollar closed at 111.85/90 rupees Monday.

Update II An actively traded 5-year bond maturing on 15.07.15 was quoted at 8.68/70 percent Tuesday down from 8.80/82 percent levels a day earlier.

A less liquid 6-year bond maturing on 01.08.16 dropped to about 8.90 percent from around 9.00 percent and was later quoted around 8.75/85, dealers said.

A 4-year bond maturing on 01.03.14 quoted at 8.40/50 yesterday was quoted around 8.25/30 Tuesday.

On Monday 3-year bonds were quoted 7.75/85 percent, 2-year bonds 7.50/60 percent but market was dull Tuesday in morning trade, dealers said.

Sri Lanka has just sold a billion US dollar 10-year bond at 6.25 percent to international investors, lower than the 6.5 percent price guidance given by issue managers before it opened.

A source close to the deal said 6.3 billion US dollars of bids had come for the bond in 12 hours from prospective buyers in Asia, Europe and the United States.

A large part of the bond will go to bridge an 8.0 percent of gross domestic product budget deficit in 2010 reducing pressure on domestic credit markets, though a portion will also be used to restructure short term debt, according to earlier official statements.