Government. raises Rs.97bn in bonds

• Schedules 3 more bond issuances to raise further Rs.250bn

Sri Lanka raised a fresh Rs.96.6 billion last Friday by offering bonds maturing in between 3 to 8 years as the government borrowed extended maturities to lock in lower borrowing cost for the medium to long-term. 

The moneys were raised at weighted average yields between 5.72 percent and 7.07 percent as Treasury yields had significantly trended downwards in response to aggressive easing of the monetary policy. 

The Central Bank issued Rs.100 billion in rupee bonds last Friday, but accepted bids worth only Rs. 96.6 billion across the three tenors with the longest tenor bonds ended up being under accepted.

The Public Debt Department (PDD) of the Central Bank offered Rs.30 billion in 3-year bonds, maturing on October 1, 2023 at 7 percent, Rs.40 billion in 5-year bonds maturing on February 1, 2026 at 9 percent and Rs.30 billion in 8-year bonds maturing on July 01, 2028 at 9 percent. 

While the bond offering received bids well exceeding the offered amounts at all tenors, PDD accepted the offered amounts under 3-year and 5-year tenors, but accepted only Rs.26, 565 million under the 8-year tenor bond.

The 3-year bonds were raised at a weighted average yield of 5.72 percent, 5-year bonds at 6.57 percent and 8-year bonds at 7.07 percent.

Before last Friday’s bond, Sri Lanka had total outstanding stock of Treasury bills and bonds worth Rs.6.34 trillion, of which Rs.5.16 trillion were Treasury bonds. This included Rs.470.63 billion worth Sri Lanka sovereign bonds denominated in United States dollars. 

According to the tentative Treasury bond issuance calendar, the Central Bank has scheduled three other bond issuances, one each for October, November and December to raise a total of Rs.250 billion via bonds with tenors between 3 years and 12 years. 

However, this could change with future changes in the funding requirements or liability management initiatives of the government, under the Active Liability Management Act. 

During the first six months, Sri Lanka’s total public debt soared by a trillion rupees to Rs.14.05 trillion of which domestic debt rose by Rs.901.7 billion to Rs.7.53 trillion as the government relied disproportionately on domestic borrowings to take advantage of the declining borrowing cost at home. 

In late August, Parliament passed a Vote-on-Account authorising the government to spend a further Rs.949.7 billion consisting of Rs.613.45 billion for recurrent spending and Rs.336.3 billion for capital spending for the five months from August to December.

The new government will present its first budget for the fiscal year 2021 in November, which will contain in detail how the government intends to fund the deficit.