Sri Lanka sovereign yield falls to 5.57 pct, strong foreign interest

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Aug 15, 2016 (LBO) – Sri Lanka’s 10-year sovereign bond yield dropped to 5.57 percent on Monday from initial coupon of 6.825 percent indicating strong demand from international investors for emerging market bonds.

The 5-year sovereign issue has similarly fallen to 4.75 percent from 5.75 percent, with ICBC Standard Bank and Mashreq Bank of Qater buying heavily in recent weeks. The yield indicates a premium of more than 400 basis points over U.S. Treasuries.

“This is mainly due to negative interest rates in developed markets,” a dealer at Perpetual Treasuries said.

Sri Lanka’s rupee bonds too have seen foreign inflows with 70 billion rupees (482 million dollars) since April. 10-year treasury bonds currently yield an attractive 12.46 percent, with the rupee depreciating just two percent so far this year.

On the back of an IMF support programme of 1.5 billion dollars, Sri Lanka’s finance minister said last week that he expects a 600 million dollar BOP surplus this year.

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