Domestic Bonds

So far almost two-thirds of development bond repayments have been postponed: CB – Business News

  • Says raised US $ 800 million, with the latest issue ending April 30
  • Sri Lanka has SLDB repayments of $ 1.3 billion this year
  • Says encouraging demand seen from banks and other financial institutions

Funds to settle nearly two-thirds of the Sri Lanka Development Bonds (SLDBs), which are due this year, have been raised as these bond issues are constantly under active demand from banks and other entities in the financial services sector, the Central Bank said.

Sri Lanka has development bond repayments worth $ 1.3 billion in 2021, of which nearly $ 800 million have already been raised, with the latest issuance ending on April 30.

Sri Lanka offered US $ 750 million of development bonds in an auction held April 22-28, which ended up raising US $ 652 million to repay US $ 694 million of bond maturities on May 1.

The Central Bank raised an additional $ 42 million through a subsequent private placement through April 30, which is the total required, but concerns have been raised as to whether these bonds are struggling to attract enough. of subscriptions, the last auction not having been fully subscribed.

In January, the Central Bank offered $ 200 million in development bonds, but this is also far from being fully subscribed, as it received offers worth only $ 62.64 million, although the Central Bank only accepted $ 43.6 million.

Responding to these concerns, the Central Bank said development bonds continue to be in demand, led by banks and the financial services industry in general.

“When it comes to SLDBs, we see continued general demand from market players, especially the domestic banking and financial sector, as well as other foreign currency income entities,” said Dr MZM Aazim, Superintendent and Registrar of the Public Debt Department of the Central Bank.

Dr Aazim said funds raised through SLDBs so far in 2021 have been increased at an average cost of 7.47-7.50 percent.

Weighing in on the matter, the director of the Central Bank’s economic research department, Dr Chandrananth Amarasekara, said banks are currently operating with sufficient foreign exchange resources to purchase SLDBs as they have raised more than $ 1 billion. dollars of foreign currency deposits between the end of 2019 and March 2021.

“We see that from the end of 2019 to the end of March, the collection of foreign currency deposits from banks increased by more than US $ 1.0 billion. And I think there should be a way to invest these funds also for the banking sector, ”Dr Amarasekara said.

Meanwhile, other foreign currency liquidity through foreign currency borrowing by banks and finance companies can also be placed in SLDBs until they find the opportunity to lend such funds. This also provides them with a natural hedge against currency risks.

The Central Bank recently announced its intention to relax some regulations for banks and finance companies in order to mobilize foreign currency funds for their equity needs, which in turn strengthens the country’s external reserves and hence the exchange rate.