Sri Lanka's Bank of Ceylon to Sell US$ 500mn Bonds in International Market. UBS to Manage the Sale

28th March 2013, www.lankabusinessonline.com

Sri Lanka's state-run Bank of Ceylon would sell plans to sell between 300 to 500 million US dollars of bonds in the international market, a media report said.


Bloomberg newswires said UBS has been hired to manage the sale.

Fitch Rating has given a BB- expected rating to the securities which will have a tenor of five years.

Last year the Bank of Ceylon raised 500 million US dollars from international markets.

State-run National Savings Bank is also expected to go the international markets this year.


Related Info :

• Sri Lanka's BOC Bank to Sell $500mn Bond in the First Half of 2012

• Sri Lanka’s Bank of Ceylon Raises $175mn Syndicated Loan from Middle East & Asian Banks

• CITICORP Sells Rs1bn UDA Debentures to BOC in a Land Mark Deal

Foreign Holdings of Sri Lanka Government Bonds Increase

05th March 2012, www.island.lk

Foreign investor holdings in Sri Lanka government bonds rose to 225 billion rupees in the week ending February 29, up from 212 billion rupees a week earlier, official data showed.

Treasury bill holdings rose to 91 billion rupees from 84 billion rupees a year earlier, Central Bank data showed.

The bill holding has tended to fluctuate from week to week.

Sri Lanka’s government bonds yield over 10 percent a year and the rupee fell from around 110 to 120 following several months of sterilized interventions.

The central bank has said interventions may continue for at least two to three months for about 850 million US dollars.

Sterilization of those interventions would continue to put pressure on the rupee, analysts have warned.

Sri Lanka’s forex pressure came from developments in domestic credit market to which ‘hot money’ outflows have not contributed so far.


Related Info :

• There is No Capital Flight from Sri Lanka - Central Bank. IMF Deal to be Resumed

Sri Lanka's BOC Bank to Sell $500mn Bond in the First Half of 2012

04th January 2012, www.lankabusinessonline.com

Sri Lanka's state-run Bank of Ceylon, the island's largest lender is looking to sell a 500 million dollar bond in the first half of this year chairman Gamini Wickramasinghe said.

"It will be during the next three to four months," he said. "The bond will be rated."
Bank of Ceylon has been one of the most prolific banks to go to international markets. It has previously raised money through syndicated loans.

Last month the bank raised 140 million dollars from UAE based Mashreq Bank.

Bank of Ceylon had gross assets of 779.1 billion rupees (6.8 billion US dollars) by end September 2011 and net assets of 31.45 billion rupees (276 million US dollars).

In the nine months to September it earned profits of 6.78 billion rupees (59 million US dollars.

It is rated AA+(lka) by Fitch.

Sri Lanka's central bank has urged banks to borrow abroad using the benchmarks set by government bonds.

In 2012 the central bank is expecting one billion dollars in Tier II capital to flow into banks from abroad.

Related Info :

• Sri Lanka’s Bank of Ceylon Raises $175mn Syndicated Loan from Middle East & Asian Banks

Sri Lanka Raises $ 1bn 10yr Sovereign Bond Riding on the Country’s Recovery Story and Positive Reviews by Rating Agencies

22nd July 2011, www.financeasia.com, By Denise Wee

Markets have hardly been conducive to new debt issues recently, but Sri Lanka took advantage of a brief calm early yesterday morning to successfully price a $1 billion 10-year global bond.

Sri Lanka is used to dealing with bigger problems than volatile financial markets, and the once war-torn country’s ability to raise such a large amount of money at a competitive yield is testament to just how far it has come since the civil war ended in 2009 — and contrasts sharply with the experience of its embattled European peers.

Bank of America, Merrill Lynch, Barclays Capital, HSBC and Royal Bank of Scotland were joint bookrunners for the deal. Bank of Ceylon acted as a co-manager.

The leads kicked off roadshows on July 11 and decided to push ahead with pricing slightly ahead of schedule as they saw a window to launch a transaction amid relatively stable markets. They released initial guidance in the area of 6.5% on Wednesday morning ahead of officials wrapping up one-on-one meetings with investors in London later that day.

During midday London time, the leads revised guidance to 6.25% to 6.375%. Momentum for the transaction continued to build and the order book reached more than $5 billion before the US opened. The bonds eventually priced at the tight end of that final guidance, offering a spread of 332.2bp over US Treasuries.

While it was on the road, Sri Lanka also received a vote of confidence from the rating agencies. Fitch upgraded its rating on Sri Lanka to BB- from B+ on July 18, citing the country’s stabilisation and economic recovery under the IMF programme, as well as its efforts to address its budget deficit. Moody’s and S&P both revised their outlooks on Sri Lanka to positive but kept their ratings at B1 and B+ respectively.

“Sri Lanka has come a long way,” said one person familiar with the deal. “We are getting bad news out of Europe on an almost daily basis, so we were pleasantly surprised when the deal was done at a coupon of 6.25%,” he added.

The deal appealed to the US emerging market and global funds, which saw rarity value in the deal. Sri Lanka tapped the market just 10 months ago, but has fewer outstanding bonds than Indonesia and the Philippines.

The final book stood at $7.5 billion, with orders from 315 accounts. US investors were allocated 43%, Europe was allocated 30% and Asia 27%. Fund managers were allocated the biggest share with 86%, banks/private banks were allocated 8%, corporates 3% and insurers 3%.

The rush of fund flows from the US into emerging market sovereigns — which started in 2009 and accelerated last year — has tapered off slightly this year as investors have turned defensive. However, Sri Lanka has shown that there is still ample demand in the US for the right credit.

Malaysia’s $2 billion sukuk global bond, in contrast, attracted a more muted response from US investors, who were allocated just 4% of the five-year tranche and 15% of the 10-year tranche.

Sri Lanka’s bonds traded at 101.5 in the secondary market yesterday morning, rising 1.5 points from the par issue price.

The deal is Sri Lanka’s second 10-year issue. The sovereign priced its debut $1 billion 10-year global bond in September last year via arrangers Bank of America Merrill Lynch, HSBC and Royal Bank of Scotland. That deal paid a similar coupon of 6.25% but offered a higher spread of 373.1bp over Treasuries. As a spread over Treasuries, Sri Lanka paid roughly 40bp less in its latest deal.

According to one person familiar with the deal, the Sri Lanka bonds maturing October 2020 were trading at a yield of 6.1% while the new bonds were being marketed. Taking into account the US Treasury yield curve, the nine-month extension was worth about 14bp. This put the theoretical value of the new 10-year bond maturing July 21, 2021 at about 6.24%, which meant that the new bonds came with hardly any new issue premium. Following the pricing of the deal, the existing Sri Lanka October 2020s rallied and were quoted at 102.5 and a yield of 5.9%.
Related Info :

• Sri Lanka's $1bn Bond to be Managed by HSBC, Bank of America & Royal Bank of Scotland

• Sri Lanka's $ 1bn 10yr Sovereign Bond May Yield 6.5pct and Expected to be Comfortably Oversubscribed

• Moody's Gives Sri Lanka B1 Sovereign Rating with a Stable Outlook

• Fitch Affirms Sri Lanka's LTIDR B+. Revised Outlook to Positive from Stable

• S&P Raises Sri Lanka’s Ratings. B+ for Foreign Currency Debt with a Stable Outlook

Barclays Recommends Sri Lanka’s Debt over Vietnamese Dollar Bonds with Sri Lanka's Improving Rating & Economy

17th December 2010, www.bloomberg.com

Investors should sell Vietnam’s 10- year dollar bonds and buy Sri Lankan debt after Moody’s Investors Service cut the Southeast Asian nation’s credit rating, according to Barclays Plc.

Moody’s lowered Vietnam’s long-term foreign-currency rating to B1, four levels below investment grade, from Ba3 on Dec. 15. The ratings company cited the risk of a balance of payments crisis, a drop in foreign reserves, quickening inflation and the weakening dong for the assessment. Concern about what policy directives the ruling Communist Party will take at its 11th National Congress next month also reduces the debt’s appeal, Barclays analysts wrote in a research report today.

“We believe there should be more clarity on the policy direction for growth, inflation and the currency when the National Congress has completed,” according to the report headed by Singapore-based economist Prakriti Sofat.

Barclays is recommending Sri Lanka’s debt because it says the country’s rating may be upgraded due to improvements in the budget and the balance of payments. The nation is rated B1 by Moody’s and that may be raised by one level next year, a separate Barclays report said last week.

“We remain constructive on the Sri Lankan sovereign given its gradually improving budget position, upbeat growth outlook, robust balance of payments and rising foreign-currency reserves,” Sofat wrote.

Yield Premiums
The yield on Vietnam’s 6.75 percent dollar-denominated note due January 2020 has climbed 21 basis points since the Moody’s announcement to 6.31 percent as of 1:35 p.m. in Hanoi, according to prices from the Royal Bank of Scotland Group. That’s the highest level since July. The yield on Sri Lanka’s 6.25 percent U.S. currency bond due October 2020 has advanced 14 basis points in the same period to 6.25 percent, RBS prices show.

The extra yield investors demand to hold Vietnam’s debt over U.S. Treasuries widened 38 basis points to 279 yesterday, according to JPMorgan Chase & Co.’s EMBI Global Diversified Sovereign Spread Index. For Sri Lanka, the premium climbed 13 basis points to 260, near a record low of 247 reached on Dec. 15.

The cost of protecting Vietnam’s sovereign bonds from default for five years has increased 24 basis points this week to 286, according to CMA prices.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net.

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

Related Info:
Moody's Gives Sri Lanka B1 Sovereign Rating with a Stable Outlook

Sri Lanka $1bn Bond Issue Closes in 14 Hours Attracting $6.3bn Bids

Sovereign Bond Investors Should Turn to Sri Lanka over Vietnam Says Nomura

Securities Investment Accounts (SIA) Replace SIERA & TIERA Accounts - For Investment in Sri Lankan Equity, Debt and Unit Trusts

SIA is a Sri Lankan Rupee (LKR) Account which eligible investors could open to invest in Government Securities (Treasury Bills and Treasury Bonds), Equity Capital of Companies incorporated in Sri Lanka and Units of Unit Trusts in Sri Lanka.

NOTE: Following LKR Accounts which were already opened for investment purposes will be re-named Securities Investment Accounts (SIA):

• Share Investment External Rupee Account (SIERA)
• Treasury Bond Investment External Rupee Account (TIERA 1)
• Treasury Bills Investment External Rupee Account (TIERA 2)
• Treasury Bonds and Bills Investment External Rupee Account – Deshabhimani for Sri Lankan Diaspora and Migrant Workers (TIERA-D)

Features and Benefits of Securities Investment Accounts (SIA)

• Remittances to the SIA would automatically be converted at the prevailing exchange rate to Sri Lankan Rupees (LKR) for investment.
• Not subjected to further taxation when investing in Government Securities, since a withholding tax of 10 percent of interest is charged at source.
• No exchange control regulations to repatriate original investment and any income realized (interest, maturity proceeds, sales proceeds of shares, dividend payments, liquidation proceeds of companies and proceeds of redemption of units) in any designated foreign currency to your overseas account.
• Ability to forward book foreign exchange to mitigate potential exchange rate risk.
• Transfer of funds between SIA of the same account holder is permitted.
• SIA maybe held jointly by eligible investors.
• Eligible investors who invest in Treasury Bonds/Treasure Bills are permitted to enter into Repurchase (Repo) and Reverse Repurchase (Reverse Repo) transactions using Treasury Bonds/Treasure Bills purchased under this scheme as collateral.
Who Can Open a SIA Account?
• Foreign institutional investors such as country funds, regional funds or mutual funds.
• Corporate bodies incorporated outside Sri Lanka.
• Citizens of foreign states, whether resident in Sri Lanka or outside Sri Lanka
• Non-resident Sri Lankans.
• Sri Lankan professionals living in Sri Lanka who receive inward remittances.
• Dual citizens who receive inward remittances.

What Deposits are Permitted to a SIA Account?

• Inward remittances received from abroad through banking channels.
• Transfer of funds from NRFC/FCBU/RNNFC accounts of the same account holder.
• Sale proceeds realised out of sale/transfer/maturity proceeds of Treasury Bonds/Treasury Bills or any income realised by way of capital gain thereof.
• Sale proceeds of share supported by documentary evidence (Broker's Contract Notes and evidence of tax payments, etc) and dividends.
• Dividend income on units of unit trusts net of tax supported by documentary evidence.
• Proceeds on redemption of units net of tax supported by documentary evidence.
• Commissions relating to share transactions with supporting evidence.
• Liquidations proceeds of companies.
• Interest received on Treasury Bonds held by the account holder.
• All other credits permitted on shares in terms of operating instructions No.06/02/12/2001 dated 06/11/2001 in respect of stock borrowings and lending (SBL) transactions.
• Local expenses incurred by account holder.
• Inward remittances for investments in debentures.
• Proceeds realized out of sale or transfer or maturity of debentures.
• Interest accrued on debentures.

What Withdrawals Can be Made to a SIA Account?

• Payments for investments in shares/units of unit trusts/Treasury Bonds/Treasury Bills.
• Outward remittances of sale/redemption/maturity/liquidation proceeds of shares/units/Treasury Bonds/Treasury Bills and dividends of shares or units.
• Payments to brokers, primary dealers, lead managers, management company of a unit trust and bank charges.
• Local expense payments in LKR of the account holder.
• Transfer of funds to the accounts maintained by the account holder at FCBU.
• All debits permitted in the operating instructions No.06/02/12/2001 dated 06/11/2001 in respect of SBL transactions on shares.
• Payments for investments in debentures.

Documents Required to Open a SIA Account?

For Individual Investors:
• Relevant mandate (duly completed).
• Photocopy of passport (relevant pages where photograph and personal details are available).
• Letter of introduction from your Banker overseas (required only from citizens of foreign states).
• Declaration from the customer.
• Central Depository System (CDS) Account Opening Form duly completed.

For Corporate Investors:
• A certified copy of the Certificate of Incorporation.
• Copy of Memorandum (as appropriate) and Articles of Association duly certified by the Chairman and Secretary.
• Certified extract of Resolution of the Board of Directors as stated in the Account Opening Form.
• Certified list of the Directors issued by the Registrar of Companies of the country where the Company is incorporated.
• Specimen signature cards of officials who are authorized to operate the account and copies of their passports duly witnessed by the Chairman/Secretary of the Company.
• Letter of Introduction from Institutions Banker overseas.
• Central Depository System (CDS) Account Opening Form duly completed.

See Also:
• How to Invest in Sri Lanka Government Securities - Treasury Bills and Bonds
• How to Invest in Sri Lanka Equity Market - Colombo Stock Exchange, the Best Performing Capital Market of the World

Sovereign Bond Investors Should Turn to Sri Lanka over Vietnam Says Nomura

06th October 2010, www.bloomberg.com

Sovereign bond investors should buy debt of Sri Lanka over Vietnam as the island nation progresses in setting aside three decades of war to record economic growth that outpaces its rival, according to Nomura Holdings Inc.

“Sri Lanka has become the new darling of the Asian emerging-market space,” credit analysts led by Hong Kong-based Pradeep Mohinani wrote in an Oct. 5 note to clients. The nation is the “the sovereign story in Asia to dislodge Vietnam, which has lost its allure,” he said.

The island nation south of India, recovering from civil unrest, last month attracted more than $6.3 billion of orders for a $1 billion global bond sale. The October 2020 notes were sold to yield 6.25 percent, or 373 basis points more than similar-maturity U.S. Treasuries. The spread has since narrowed 15 basis points to 358 basis points, according to Nomura. A basis point is 0.01 percentage point. Narrowing spreads indicate rising bond prices.

Sri Lanka’s $42 billion economy expanded 8.5 percent in the three months to June 30 from a year earlier, the most since 2002, its statistics department said Sept. 16. The economy may grow as much as 8 percent this year, more than a previous forecast of 7 percent, the central bank said last month.

“The country clearly has the tailwinds behind it,” Mohinani wrote. “We expect the entire Sri Lanka curve to converge to the Vietnam curve in due course,” he said, referring to movements in benchmark yields.

Vietnam Rates

In Vietnam, banks were asked this week to cut deposit rates to no more than 11 percent in an effort to spur growth in the $92 billion economy. The nation’s gross domestic product may expand 6.7 percent this year, Nguyen Xuan Phuc, chairman of theGovernment Office said on Sept. 30.

The $1 billion of January 2020 bonds sold by Vietnam’s government in January pay a coupon of 6.75 percent and were issued at a spread of 332.7 basis points more than similar- maturity Treasuries, according to data compiled by Bloomberg. They’re now trading at a spread of 292 basis points, having narrowed 41 basis points, Royal Bank of Scotland Group Plc prices on Bloomberg show.

Dollar bonds in Vietnam returned 7 percent last quarter compared with 6 percent for dollar debt in Sri Lanka, JPMorgan Chase & Co. indexes show.

To contact the reporter on this story: Katrina Nicholas in Singapore at knicholas2@bloomberg.net

Sri Lanka Telecom to Raise $125mn to Fund Expansion

04th October 2010, www.lankabusinessonline.com

Sri Lanka Telecom, the island's largest fixed access operator, may raise 125 million US dollars from bonds to fund expansion if the terms are right, as business conditions in the island improve, an official said.

"We want to raise 125 million US dollars," SLT's chief financial officer Shiron Gooneratne said.

"We have got several good proposals from investment banks in response to a request for proposals. But the board (of directors) is also looking at other options."

SLT is majority owned by the Sri Lanka government but its largest outside shareholder is Malaysia's UT group, which has appointed the chief executive.

Fitch Ratings which raised the outlook on SLT's 'B+' foreign currency rating to 'positive' from 'stable' last month - along with a lifting of the outlook on Sri Lanka's sovereign rating - said the firm had "strong access" to bank loans.

SLT has a 'AAA (lka)' national rating. Sri Lanka's government last week raised one billion US dollars from a 10-year bond at 6.25 percent.

Standard and Poor's also raised Sri Lanka's rating by one notch to 'B+' on better prospects after the end of a war and expectations that a deal with the International Monetary Fund will keep excessive state spending in check.

Sri Lanka's rupee interest rates are low by historical standards with the prime rupee lending rate around 9.9 percent on October 01 against 21.1 percent two years ago, according to central bank data.

Sri Lanka's commercial banks are liquid and looking for good projects to lend. Loans to private business are now starting to grow faster after slumping for most of 2010.

With the end of a 30-year war the SLT is looking to increase capital expenditure, Gooneratne said.

"We are investing in the North and the East," Gooneratne said. "We recently extended our fibre optic network to Jaffna. The general business conditions are improving."

Fitch said better economic conditions after the end of the war and a price floor imposed by the telecom regulator to end a price war (which started in the mobile sector) is expected to stem a fall in SLT's margins.

Sri Lanka's wireline business shrank in 2009 as subscribers shifted to mobile use. But during the second quarter of 2010 wireline has started to grow again and fixed access wireless - where SLT is also active - grew at 3.8 percent.

SLT also owns Mobitel, a celco. Sri Lanka's mobile users grew 25 percent in the second quarter from a year earlier, according to official data.

Sri Lanka's UDA Debentures Open on Sept 23. 30% of Rs 10bn 5yr Bond Open to Foreign Investors

19th September 2010, www.dailynews.lk, By Harshini Perera

The UDA debenture issue will be open to the public on September 23. It will close after 14 days of the opening date.

Depending on the present demand, it is expected to close before 14 days, Bank of Ceylon, Investment Deputy General Manager P A Lionel told Daily News Business. The prospectus for the UDA debenture is available at the Colombo Stock Exchange (CSE) website.

The printed version will be available to the public from September 20.The self-financing UDA debenture issue will be utilised to construct low-income housing schemes for unauthorized dwellers in the Colombo metropolitan city limit.

Under this initiative, a revolving housing project of 65,000 units will be constructed. It will enable the Government to use 800 acres of valuable land for commercial purposes in the Colombo metropolitan area.

These lands are now occupied by unauthorized persons.

Related Info:
Sri Lanka's UDA Launched 5yr Bond to Raise Rs 10bn. 30pct Open to Foreign Investors

Sri Lanka's UDA Launched 5yr Bond to Raise Rs 10bn. 30pct Open to Foreign Investors

10th September 2010, www.lankabusinessonline.com

Sri Lanka's Urban Development Authority (UDA), a state agency, has launched a 5-year bond to raise 10 billion rupees and 30 percent of the issue is open to foreign investors, officials said.

Gotabhaya Rajapaksa, secretary to Sri Lanka's defence ministry, under which the agency operates, said the money would be used to build alternative houses for unauthorized dwellers in 800 acres of high value state land in Colombo city.

Investors could chose between three interest options: 11.0 percent annual, 10 percent monthly or a floating rate of Treasury bill plus 75 basis points every six months, Gamini Wickremasinghe, chairman of state-run Bank of Ceylon which is managing the issue said.

The issue opens for subscriptions Monday. The UDA said it would be able to build around 20,000 houses if 5.0 billion rupees was raised and around 65,000 if 10,000 billion rupees was raised.

P A Lionel, head of investment banking at Bank of Ceylon said commitments for over 5.0 billion rupees had already been received and they were open to offers for 10 billion rupees.

The bonds come with a Treasury guarantee.

Once city property has been released by shifting unauthorized dwellers, the UDA will lease the land to commercial developers. The debt will be serviced with the lease proceeds.

Lionel said foreign investors were among those who have committed to buy bonds. Sri Lanka's central bank has given permission for foreign investors to buy up to 30 percent of the issue or 30 billion rupees.

Up to 10 percent of outstanding government securities are already open to foreign investors and buyers have piled into the high yielding debt.

Sri Lanka Bonds Out Perform BRIC Bonds in International Capital Markets - Survey by JP Morgan Chase and Co

01st September 2010, www.island.lk

After the end of a thirty year old war last year, Sri Lanka’s sovereign bonds have out performed bonds from Brazil, Russia, India and China (BRIC) in international capital markets according to a survey carried out by JP Morgan Chase and Co, which augurs well for US$ 1 billion sovereign bond issue later this year, a report by Bloomberg newswire service said.

"Sri Lankan debt has returned 39 percent since May 18, 2009, when the government defeated Tamil Tiger rebels, according to JPMorgan Chase & Co.’s EMBI Global Index. That compares with 12 percent in China, 22 percent in Brazil and 26 percent in Russia. Company bonds of India, which doesn’t have a dollar-sovereign issue, delivered gains of 26 percent," Bloomberg newswire said in a report filed August 30.

Bloomberg said BRIC economies accounted for about 40 percent of the world’s foreign-exchange reserves and its population. "The Colombo All-Share Index of shares climbed 177 percent since the war ended, the world’s best performer, while the rupee strengthened 2.2 percent to 112.65 per dollar," it said.

The government is planning to issue a US$ 1 billion Eurobond issue later this year to retire short term domestic debts and meet short term foreign loan commitments.

State banking giant Bank of Ceylon was appointed to manage the sovereign bond issue along with HSBC, Bank of America Merrill Lynch and the Royal Bank of Scotland. These three banks were recently appointed by the government as advisors to Sri Lanka’s efforts to improving its sovereign rating to investment grade. Their term as advisors would last four years. Ten international investment banks had vied for this position.

According to Bloomberg investors were seen to be bullish on Sri Lanka’s next debt issue.

"Demand for bonds from countries like Sri Lanka is still high," said Milan-based Francesca Di Cesare, who helps oversee $10 billion of assets including 2015 Sri Lankan debt at Aletti Gestielle SGR SpA, as quoted by Bloomberg newswire, "Investors struggle to find this paper."

Bloomberg also quoted a portfolio manager Jetro Siekkinen, who oversees $7.8 billion of assets including Sri Lankan 2015 debt at Aktia Asset Management in Helsinki who said, "Demand will be strong and I will definitely be adding on to my holding. The sales should be successful in this kind of yield-hungry environment," he told Bloomberg.

The Central Bank is observing radio silence as per US Securities and Exchange Control laws and officials are not permitted to comment on the upcoming issue, let alone announce its issue date, until and after the offer is closed.

Sri Lanka Sells 275mn of Dollar Denominated Bonds in June

14th June 2010, www.bloomberg.com, By Anusha Ondaatjie

Sri Lanka plans to sell $275 million of dollar-denominated bonds locally this month to pay for maturing debt, three months after failing to raise a targeted $100 million through a debt auction.

The South Asian nation will issue $175 million of two-year debt and $100 million of three-year paper, the Central Bank of Sri Lanka said on its website today.

Subscriptions for development bonds close on June 18. The nation raised $92 million by selling development bonds through competitive bidding in March, and the central bank subsequently raised $8 million through placements that month.

“Looking at the liquidity situation, I expect favorable rates” for the June issuance, C.J.P. Siriwardena, head of the central bank’s public debt, said in a telephone interview. “We want to extend the yield curve and maturity structure.”

President Mahinda Rajapaksa, who was re-elected to a six- year term in January, has pledged to spend $1 billion on ports, roads and power plants this year to help drive economic growth to as much as 7 percent.

The government is targeting a budget deficit of 7.5 percent of gross domestic product in 2010, compared with an actual shortfall of 9.7 percent last year. The International Monetary Fund set a deficit target of 6 percent for this year when it granted a $2.6 billion emergency loan in July 2009 to help the nation tide over a foreign-exchange crisis.

Sri Lanka may find it “challenging” to meet this year’s budget-deficit target as the government steps up spending to rebuild infrastructure after the end of a three-decade-long civil war, central bank Governor Nivard Cabraal said on Feb. 9.

In March, Sri Lanka sold $37 million of two-year bonds at a weighted-average yield of 380 basis points above Libor and $55 million of three-year debt 395 basis points over Libor. A basis point is 0.01 percentage point.

The June issuance will pay a margin over the six-month London interbank offered rate.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

Sri Lanka Development Bonds - Details

Sri Lanka Keeps Policy Rates & Treasury Yields Stable, Inflation Subdued

21st May 2010, www.island.lk, By Devan Daniel

The Monetary Board of the Central Bank has decided to keep rates at which commercial banks lend or borrow from the Central Bank stable as inflation remains subdued while benchmark Treasury bill rates remained relatively stable this week with the bank financing the payment of maturing bills amounting to a little more than Rs. 1.5 billion.

The point-to-point change in inflation fell to 5.8 percent in April after reaching above 6 percent in March but the annual change in the rate of inflation moved up to 3.4 percent, raising since 3.1 percent last February.

"Price pressures in the economy have been dampened by improvements on the supply side, particularly the noteworthy performance in paddy production. Prices of key commodities in the international markets also remain subdued," the Central Bank said.

For these reasons, price pressures are expected to be subdued in the short term, the bank said in its monetary policy review for May.

Therefore, the Monetary Board of the Central Bank ahs decided to keep policy interest rates unchanged at 7.5 percent and 9.25. These rates apply to overnight placement of excess funds of commercial banks (repurchase rate) with the Central Bank and borrowings (reverse repurchase rate) form the Central Bank respectively.

The Central Bank said credit to the private sector had improved with positive growth for March 2010 after making negative gains since April last year, but no figures were given. The latest Weekly Economic Indicators published by the bank indicates a 2.8 percent drop in private sector credit last February from the previous year.

However, the Central Bank said credit to the private sector is picking up.

"The gradual expansion in credit obtained by the private sector indicates the solidifying recovery in the economy," it said.

However, the Central Bank earlier this month said that it was constantly asking commercial banks to revise their lending rates to more reasonable levels and that credit to the private sector was too slow to recover despite loosening monetary policy throughout the latter part of 2009.

Dealers said excess liquidity in the rupee market continued to be high. Dealers said the surplus reached Rs. 33 billion as at Wednesday. With commercial banks still cautious in their lending to the private sector, government securities were the preferred option.

Meanwhile, broad money growth fell to 17.1 percent year-on-year this March from 18.6 percent as at end 2009. "Broad money growth remains compatible with the levels targeted in the monetary programme at the beginning of the year," the Central Bank said.

Broad money is defined as the sum of currency held by the public and all deposits held by the public with commercial banks. This is a popular variable that is used to analyse the relationship between the money supply and the general price level, or inflation.
Treasury yields stable
Treasury bill rates remained relatively stable at this week’s primary market auction of maturing bills amounting to Rs. 13 billion. The Central Bank accepted re-issued Rs. 11,443 million of these financing the settlement of the balance Rs. 1,557 million with access funds held in its position.

The six-month and 12-month Treasury bill rates remained unchanged at 8.88 percent and 9.23 percent respectively from a week ago but the yield on the three-month bill increased marginally to 8.13 percent from 8.18 percent a week ago.

The Rs. 13 billion maturing bills attracted bids amounting to Rs. 24.62 billion from primary dealers but only Rs. 11.4 billion was accepted with the balance bought by the Central Bank. Analysts said this was done by printing new money but a top Central Banker said the bank has a stock of excess funds for this purpose.

IMF and budget deficits
The biggest risk to maintaining low inflation and low interest rates is from the budget deficit and Central Bank warned that the government would have to contain high deficits.

The IMF is expected to announce the fate of the US$ 2.6 billion standby facility programme today after it deferred the payment of the third US$ 326 million tranche earlier this year when the government overshot the 7 percent of GDP deficit target for 2009, reaching 9.8 percent.

The government announced that it would target a deficit of 7.5 percent this year which would be brought down to 5 percent by 2012, but the IMF said it would want to see the proof when the next budget is announced.

The next budget is to be announced in November for the 2011 fiscal year. An interim budget for this year is to be announced by the end of June.

Although Sri Lanka has built comfortable levels of foreign exchange reserves, more than US$ 5 billion, economists point out that the continuance of the IMF programme would give long term investors confidence in Sri Lanka’s macroeconomic prospects.

An IMF mission is in the island and is expected to complete its review of the standby facility programme today.

Sri Lanka to Keep Rates on Hold, No Plans to Sell any Bonds Immediately

18th May 2010, www.bloomberg.com, By Shamim Adam

Sri Lanka’s benchmark interest rates will likely remain unchanged this week as inflation remains “benign,” central bank Governor Nivard Cabraal said in an interview in Singapore today.

“We will see a similar situation being maintained because inflation figures have been moderate, it’s been quite benign,” he said after speaking at an investment seminar. “We still have a little slack, so most probably monetary policy will remain at the level that it is.”

Sri Lanka’s policy makers are seeking to stoke growth after the end of a civil war in 2009. The central bank, which will release a policy statement on May 20, left the reverse repurchase rate unchanged at 9.75 percent last month, its lowest level since August 2005, and maintained the repurchase rate at 7.5 percent.

Consumer prices in the capital, Colombo, rose 5.8 percent in April from a year earlier, according to the statistics department. Inflation averaged 12.6 percent in the five years through 2009.

Peace in the South Asian nation is attracting tourists and investment, helping companies such as John Keells Holdings Plc, which has port, supermarket, hotel, property development and brokerage arms. Sri Lanka’s stock index is one of the world’s best performers in the past year.

The economy may expand more than 6 percent this year, Cabraal told investors today, supporting the central bank’s forecast for growth of 6.5 percent in 2010, the fastest pace in three years.

The island doesn’t plan to sell any bonds immediately and will review its funding options after the budget is unveiled, he added. The governor said last month Sri Lanka may sell more dollar-denominated bonds this year to fund its budget deficit.

To contact the reporter on this story: Shamim Adam in Singapore at sadam2@bloomberg.net

The Banker Names Sri Lanka Winner for Bonds SSAs in 'Deals of the Year 2010'

01st May 2010, www.news.lk

'The Banker' which is known for providing 'Global Financial Intelligence' since the year 1926, in its 'Deals of the Year 2010' made the Democratic Socialist Republic of Sri Lanka the winner for 'Bonds SSAs' category along with joint lead manager and joint bookrunner RBS and JPMorgan for the US Dollars 500 million global bond offering.

Following the end of its 26-year civil war in May 2009, the Sri Lankan government has been eager to kick-start redevelopment and build a foreign investor base. In order to raise finance to fund its expansive post-conflict reconstruction programme, the Sri Lankan government launched its first international debt issue of $500m in five-year
bonds in October 2009.

Despite the overwhelming popularity of the issue, pricing the bonds proved a challenge: the country's outstanding bonds, executed in 2007, were highly illiquid, and while the market conditions at the time were broadly strong, the environment remained volatile. Following initial price talk of 8%, however, the issue was priced at 7.4%, well below the Sri Lankan government's initial target coupon, with a final order book of more than $6.8bn. At 13 times oversubscribed, the bond sale proved a huge success for an infrequent sovereign issuer amid untested investor appetite and has served as a major showcase for Sri Lanka, setting the stage for future issues.

Globally, with the economic environment still uncertain and markets often volatile, last year's deals demanded every ounce of tenacity and expertise available at corporates' relationship banks. The Banker's Deals of the Year are testament to those qualities.

From the markets' nadir in 2008, 2009 surprised virtually everybody by turning out to be something of a banner year for many investment banking businesses. Indeed, a handful of banks had record years in some sectors. Bond businesses, FIG capital raising and restructuring, among other areas, boomed. But against an uncertain economic backdrop, deals demanded slick execution skills and commitment to customers. The
Banker's judges considered 485 worldwide deals from more than 100 banks, with many breaking new ground, in new markets, for new names.

How to Invest in Sri Lanka Government Securities - Treasury Bills and Bonds

Sri Lanka Treasury Bills and Bonds attract foreign investors for a number of reasons. Prime among them are the stability of the booming economy of Sri Lanka and the higher interest rates offered on these government debt instruments compared to similar securities from other countries especially US and Europe. Sri Lanka Treasury Bills and Bonds are Tax Free as withholding tax is charged at source. Pl See: Current Rates on Treasury Bills and Bonds - Central Bank of Sri Lanka 

What is a Treasury Bill?
Treasury bill is a short term debt instrument of 3, 6 or 12 Months issued by the Government of Sri Lanka. Treasury Bills are discounted instruments - the investor pays the discounted value (investment value) and receives the face value on maturity. Government issues Treasury Bills through weekly auctions and interest is decided based on the bids received.

What is a Treasury Bond?
Treasury Bond is a medium to long term debt instrument of 2 to 20 Years issued by the Government of Sri Lanka. Treasury Bond carries a coupon (interest) which is paid on a half yearly basis, and the principal is repaid on maturity.

What is Sri Lanka Development Bond?
Sri Lanka Development Bonds (SLDBs) are a debt instrument denominated in US Dollars issued by the Government of Sri Lanka. Interest is paid to the holder every six months and the principal repayment is made at the end of the maturity period. Calculation of interest payments will be based on the six month London Inter Bank Offered Rate (LIBOR) for USD per annum plus a margin determined through competitive bidding at the auction.

Who Issues Treasury Bills/Bonds?
As an Agent of the Government of Sri Lanka, the Public Debt Department of the Central Bank of Sri Lanka (CBSL) issues the Treasury bills and Treasury Bonds, and in the case of Treasury Bills repays maturity proceeds on maturity, and for Trasury Bonds pays interest on due dates and repays the principal on maturity.

Types of Government Securities
• Rupee Denominated Securitie
• Treasury Bills : Available to foreign investors, Sri Lankan diaspora living/working abroad and Sri Lankan citizens.
• Treasury Bonds : Available to foreign investors, Sri Lankan diaspora living/working abroad and Sri Lankan citizens.
• Inflation-linked Bonds : Available only to Sri Lankan citizens.
• Foreign Currency Denominated Securities
• Sri Lanka Development Bonds : Available to foreign investors, Sri Lankan diaspora living/working abroad and Specified Companies.

How to Invest in Government Securities?
Investors can purchase Treasury Bills/Bonds either from auctions in the primary market through a designated Primary Dealer (PDs) on specified dates, or from the secondary market through Primary Dealers, Commercial Banks or the Joint Lead Managers in the case of Sri Lankan Diaspora business on any week day.

Can I Invest in Treasury Bills/Bonds?
Yes, if you are one of the following,
a) Foreign institutional investors such as foreign country funds, mutual funds and regional funds.
b) Corporate bodies incorporated outside Sri Lanka.
c) Citizens of foreign states.

What are the Main Features of Treasury Bills?
• Risk free, gilt edged debt instrument
• Short term debt instrument (3 to 12 months)
• Maturity proceeds (Face value) will be paid on maturity
• Yield rates are determined by the market
• Tradable instrument in the secondary market
• Issued in scripless form

What are the Main Features of Treasury Bonds?
• Risk free, gilt edged debt instrument
• Maturities are available with 2-20 years
• It carries half yearly coupon payments and the principal is repaid on maturity
• Yield rates are determined by the market
• Tradable instrument in the secondary market
• Issued in scripless form

What Benefits Can I Derive by Investing in Treasury Bills/Bonds?
• It is an absolutely risk free investment, since it is issued by the sovereign government. Hence, they are called gilt-edged securities meaning that they are covered by gold.
• You can get the highest rate of interest since the yield rates are determined in the market.
• Since these bills/bonds are tradable in the secondary market, you can obtain instant liquidity by selling them in the market.
• All receipts of interest, maturity proceeds and capital gains are fully repatriable.
• You could also have a joint investment with some other person or persons. Hence, it is a very good way to share your investments with loved persons.
• You are not subject to further taxation, since a withholding tax of 10 percent is charged at source is the final tax.
• No stamp duty is payable on these bills/bonds.
• You can get the best service from the CBSL which maintains your investment in its state of the art, Scripless Security Settlement System and the fully automated Central Depository System (CDS).

What is the Availability of Treasury Bills/Bonds to a Foreign Investor?
• Foreign investors can purchase up to 10% of the total outstanding Treasury Bills or Bonds at any given time.

According to Central Bank data foreign investors held Rs 212 billion of bonds up from Rs 199 billion on January 04 2012. Treasury bills holdings rose to Rs 84.5 billion from Rs 70.1 billion in the same period there amid periodic changes.

How Can I Apply for Treasury Bills?
• You can purchase Treasury bills at any time through Primary Dealers (PDs) or Licensed Commercial Banks (LCBs) registered with the CBSL. PDs are the institutions appointed by the CBSL for trading in Government securities. Contact details of these institutions are given below.
• You can purchase Treasury bills by sending bids to the primary auctions through PDs or through direct placements.
• In order to make arrangement for fund transfers, you can advise your own bank to open a Rupee account named “Treasury bill Investment External Rupee Account - 2 (TIERA - 2)” in an LCB in Sri Lanka. (Note: Securities Investment Accounts (SIA) replace TIERA-2).
• After completing the transaction, your agent (LCB/PD) will open a security account for you in the CDS maintained by the CBSL. This account is debited /credited simultaneously based on your tradings in the market.

How Can I Apply for Treasury Bonds?
• You can purchase Treasury bonds at any time through Primary Dealers (PDs) or Licensed Commercial Banks (LCBs) registered with the CBSL. PDs are the institutions appointed by the CBSL for trading in Government securities. Contact details of these institutions are given below.
• You can purchase Treasury bonds from the secondary market or you can even send bids to the primary auctions through PDs.
• In order to make arrangement for fund transfers, you can advise your own bank to open a Rupee account named “Treasury bond Investment External Rupee Account (TIERA)” in an LCB in Sri Lanka. (Note: Securities Investment Accounts (SIA) replace TIERA).
• After completing the transaction, your agent (LCB/PD) will open a security account for you in the CDS maintained by the CBSL. This account is debited /credited simultaneously based on your tradings in the market.

What is Primary Market?
• Information on auctions for Treasury Bills and Treasury Bonds are normally announced in the leading newspapers at least two days prior to the auction date.
• Treasury Bond series available for foreigners are announced by the Public Debt Department via e-mail to all participants in the Central Depositary System.
• In the case of Treasury Bills, newspaper advertisements are published on every Monday and the auctions are held on Wednesdays. Bids are accepted through the fully automated online bidding system.
• Treasury Bills are issued weekly, while 3-4 Treasury Bond auctions are held every month based on the Government's cash requirement.
• All investors who are willing to participate in primary auctions should submit their bids through Primary Dealers before 11 a.m. on the auction date which is the Primary Dealer's deadline for submission of bids to auction. The successful bidders are informed within two hours of the deadline for the submission of bids. Press releases are published in leading newspapers on the following day.
• Settlement of successful bids in the primary market is on two business days after the auction date (T+2). Sri Lanka Government debt securities are scripless and therefore securities transfers take place on an electronic basis. Settlement is via the electronic payment system and the Real Time Gross Settlement System on a delivery vs. payment basis.
• Investors are required to maintain accounts with Commercial Banks or Primary Dealers for cash settlement for their transactions as well as for the crediting of coupon payments. Ownership of securities is recorded in the Central Depository System maintained by the Central Bank of Sri Lanka.

What is Secondary Market?
• An investor can either hold a tradable security until maturity or sell in the secondary market prior to maturity at the current market price.
• Investors can also buy tradable securities already issued to the market by the Central Bank of Sri Lanka.
• Primary Dealers/Commercial Banks quote buying and selling prices of Treasury Bills, Treasury Bonds daily for different maturities. Investors can shop around and bargain to obtain attractive market rates for these securities.
• Sri Lankan Government debt securities are scripless and the securities transfer is done on an electronic basis. In the Scripless Securities Settlement System (SSSS) transfer instructions are carried out on a trade-by-trade basis, with the transfer of securities and the transfer of funds for payment taking place simultaneously.

Who are Primary Dealers?
Primary Dealers are institutions appointed by the Central Bank of Sri Lanka for marketing government securities in the secondary market. Primary Dealers are also responsible for supporting the primary auction and are the major participants in the competitive bidding process. Primary Dealers are required to provide liquidity in the secondary market by quoting bid and offer yields for government securities.

How Can I Collect Maturity Proceeds?
• Interest (for Treasury Bonds) and Maturity proceeds (for both Treasury Bills and Bonds) relating to Treasury Bills/Bonds are credited on due dates directly to your account through your agent. The participants of the CDS are responsible to pay dues to you on due dates.

How do I Get More Information on Treasury Bills/Bonds?
• Details on available Treasury Bills and prevailing market rates can be obtained from LCBs, PDs and CBSL Website (www.cbsl.gov.lk)
• Details on current auctions can be obtained from PDs and LCBs.
• Any detail on this scheme can be obtained from the Public Debt Department of the CBSL.
Telephone: 94 11 2 477277 /212 /274//276 /278/316
Fax: 94 11 2477718/719/759
e-mail: pddrbw@cbsl.lk

List of Participating Agents - Licensed Commercial Banks (LCBs) and Primary Dealers (PDs)
• List of Licensed Commercial Banks (LCBs)
• List of Primary Dealers (PDs)

Market Information - Primary Market
• Last Treasury Bill Auction (Press Release)
• Last Treasury Bond Auction (Press Release)
• Treasury Bill Auction Historical Data (1996-2009)
• Treasury Bond Auction Historical Data (1997-2009)

Market Information - Secondary Market
• Two Way Quotes and Market Rates for Treasury Bills and Bonds. Please see latest Weekly Economic Indicators.

Additional Information on Treasury Bills and Treasury Bonds
• Available Treasury Bond Series
• Sri Lanka Development Bonds - Latest Issue
• Outstanding Government Debt Stock - Monthly Economic Indicators
• ‘LankaSecure’ - Scripless Securities Settlement System (SSSS) and CDS
• Exchange Rates

• Treasury Bills for Foreign Investors
• Treasury Bonds for Foreign Investors
• Treasury Bills and Bonds for Sri Lankan Diaspora

Related Info :
• Securities Investment Accounts (SIA) Replace SIERA & TIERA Accounts - For Investment in Sri Lankan Equity, Debt and Unit Trusts
• Sri Lanka Offers Special Visas to Investors, Professionals & Senior Citizens

Sri Lanka Development Bond Issue for USD 100mn a Success

27th March 2010, www.dailynews.lk

In response to the SLDBs offer which amounted to US$ 50 million with two year maturity and US$ 50 million with three year maturity both foreign and local commercial banks invested US$ 100 million and the settlement for the issue took place on March 26, 2010.

US$ 92 million was raised through the auction held on March 18, 2010 and the balance US$ 8 million was mobilized via placements.

The total issue of this SLDBs amounted to US$ 45 million of two year bonds and US$ 55 million of three year bonds at the rates of US dollar six month LIBOR + 380 basis points and US dollar six month LIBOR + 395 basis points. The successful conclusion of this first SLDBs issue in 2010 is considered a positive start which reflects investors’ confidence and their preference to invest funds in foreign currency denominated bonds issued by the Government.

Exponential Profit Growth in 2009-10 at First Capital Holdings

12th December 2009, www.fclgroup.com

High-yielding bond portfolio generates strong capital gains for financial services Group Significant capital gains through judicious investments in government securities have generated exponential profit growth in the first six months of 2009-10 for First Capital Holdings PLC.

Interim financial statements filed with the Colombo Stock Exchange this week report that profits after tax grew eight-fold in the six months ending 30th September 2009 to Rs.352.6 million and profit attributable to equity holders of the parent company was up 848 per cent to Rs 296.7 million.

A company representative stated that the growth was the result of the exceptional performance of the company’s Primary Dealer arm, First Capital Treasuries Limited, headed by Mr. Mahinda Godakandaarachchi. He further stated, “The near perfect timing of First Capital’s investments in high-yielding government securities resulted in significant capital gains as the government pursued its goal of easing monetary policy.”

The cost of the company’s short term investments as at 30th September 2009 was Rs 8,753 million, compared to a market value of Rs 9,172 million, reflecting further unrealized gains of Rs 419 million.

Earnings per Share increased from 93 cents for the first half of 2008-09 to Rs 8.79 for the review period, while Group Net Assets per Share stood at Rs 21.22 as at 30th September 2009, up from Rs 10.45 a year earlier.

First Capital’s share price has appreciated almost five-fold from Rs.4.50 on 19th December 2008 to the current price of Rs.22.00.

Looking ahead, the spokesman stated, “First Capital is optimistic about the prospects for the Group’s businesses, as it expects further growth from post-war macroeconomic expansion and through opportunities arising from deregulation and market development measures currently on the cards.”

The First Capital Group boasts of a rich pedigree and a 27 year history in the Sri Lankan financial services arena. Having obtained its Primary Dealership license in 1992, the company has steadily grown to become a strong and resilient front runner with a loyal and ever widening customer base.

Of the Group’s three subsidiaries, First Capital Treasuries, which is regulated by the Central Bank of Sri Lanka and is one of only 4 non-bank Primary Dealers in the country, has built its reputation on providing personalised service, investment flexibility and competitive returns. First Capital’s investors enjoy the flexibility of investing in securities outright or on “Repo” basis for periods ranging from three months to ten years, taking loans against their investments at highly competitive rates and benefiting from an experienced financial advisory team for expert investment advice.

The other companies under the First Capital Group are First Capital Asset Management and First Capital Markets, both of which are regulated by the Securities & Exchange Commission of Sri Lanka.

First Capital Asset Management manages a substantial quantum of funds on both discretionary and non-discretionary mandates, offering instruments which span the spectrums of term and risk, including Gilt Edged paper (government securities), Commercial paper, promissory notes, corporate debentures and securitised paper.

First Capital Markets is a specialist in structuring, underwriting and placing both short term and long term corporate debt. It also offers margin facilities to clients who engage in trading of listed equity.

First Capital’s Board of Directors comprises Manjula Mathews, Dinesh Schaffter, Nihara Rodrigo and Jude Fernando.

Interest Rates in Treasury Bills Decline Further In Line with the Easing of the Monetary Policy by the Central Bank of Sri Lanka

6th November 2009, www.dailymirror.lk

The yield rates on Treasury Bills declined further at the primary auction held yesterday. The yield rate on Treasury bills with a maturity of 91 days declined by 36 basis points to 8.14 per cent, the lowest since May 2005. This trend was reflected in the yield rates of Treasury Bills with the maturities of 182 days and 364 days as well.

With this reduction, the primary market yield rates of Treasury Bills have declined by 906 - 938 basis points during the past 12 month period. The secondary market Treasury Bill yield rates also continued on its decelerating path during this period.

In the meantime the primary and secondary market yield rates for Treasury Bonds also followed the same trend and declined by 843 - 1088 basis points during the past 12 month period while the extension of the yield curve upto the 6 year horizon was also witnessed during this period with the prudent public debt management strategies.

The reduction in yield rates observed during the recent past is in line with the gradual easing of the monetary policy stance by the Central Bank of Sri Lanka, increased foreign investor participation in the Government securities market, prevailing liquidity position in the market and positive view of the market on the deceleration of inflation rate.