ECONOMYNEXT – A plain sovereign bond paying a coupon of 4.0 percent due to mature in 2028 was quoted around 6.0 percent in the first week after issue, according to data published by the central bank.
A rate of 6 percent for the 2028 compared with around 4.0 to 4.1 percent for 3 and 5-year yields indicating a risk premium of only 200 basis points for despite Sri Lanka having a rating of CCC+.
At those levels Sri Lanka would be able to roll-over debt, analysts say.
Sri Lanka issued a number of bonds with lower coupons than US Treasuries, which would go up later.
Under so-called macro linked bonds, the principal would also go up, if gross domestic product grows faster than expected.
They could also go down. As a result, they are somewhat difficult to price, as several contingencies have to be taken into account, dealers said. However closer to maturing their yields could go down.
Macro-linked bonds maturing in 2030 were quoted at 7.43 percent, 2033 ones at 7.85 percent, a 2035 bond at 8.34 percent and 2038 bonds at 8.55 percent.
A governance linked bond whose coupons would fall by up to 75 basis points if certain fiscal and other targets are met, was quoted 9.38 percent in the first week, showing the highest yield. (Colombo/Dec31/2024)
