Yield rates improve following post-attacks jump

Secondary market yield rates of Sri Lanka’s international sovereign bonds (ISBs) are nearing the levels they were at prior to the Easter attacks, following a spike in the weeks after it.

The rates, which were hovering around their original rates of primary issuance (coupon rates), increased gradually but came down last week and settled at a rate only a little higher than the pre-Easter incident rates.

Sri Lanka currently has 12 ISBs worth $ 13.05 billion, which reach maturity between 2020 and 2029.
In October 2010, Sri Lanka issued a 10-year ISB of $ 1 billion with a coupon rate of 6.25%, to repay some high-cost domestic borrowings. This was the third ISB issuance since Sri Lanka started issuing ISBs in 2007. This was 5.10% as at 18 April, two days prior to the Easter tragedy. However, currently, the rate has increased to 5.53%.

In July 2011, the Government issued an ISB amounting to $ 1 billion. The issue had a maturity of 10 years at a fixed rate yield of 6.25%.

According to the CBSL’s annual reports, the funds were utilised to restructure the Government’s outstanding debt stock with the retirement of some high-cost debt, and helped reduce pressure on domestic resources and interest rates. The yield rate of this ISB was even lower than the coupon rate as it was 5.36% as at 18 April. However, at the end of last week, yield rate of the ISB was reported as 5.86%.
Sri Lanka successfully issued its fifth ISB of $ 1 billion in July 2012, with a comparatively lower yield of 5.875% per annum and a maturity of 10 years. Most of this inflow was directed to the continuation of major infrastructure projects which commenced in 2010 and 2011. This bond reaches its maturity in July 2022 and was at a yield rate of 7.07%. Before the crisis, yield rates were 5.72%, and it was 6.07% on Friday (14).

In 2013, Sri Lanka did not issue any ISBs. The Government raised $ 2.15 billion through the issuance of ISBs during 2015.

In May 2015, the Government successfully issued ISBs to the value of $ 650 million with a maturity period of 10 years at a progressively lower yield rate of 6.125% per annum. This bond was 6.39% before the Easter incident and has now slightly gone up to 6.93%.

In addition, in October 2015, ISBs to the value of $ 1.5 billion were issued at a yield rate of 6.85% per annum with a maturity period of 10 years. This was Sri Lanka’s largest offering within a year in the international bond market since the first ISB was issued in 2007.

The ISB, which reaches maturity in November 2025, was at a yield rate of 6.47% at the end of 18 April, which has now increased to 7%.

The Government successfully issued its 10th ISB in 2016, reflecting improved investor sentiment on Sri Lanka. Accordingly, the Government was able to raise $ 1.5 billion in July 2016 through the first dual-tranche offering of 5.5-year ($ 500 million) and 10-year ($ 1.0 billion) bonds at yield rates of 5.750% and 6.825%, respectively, amidst high volatility in the global markets.

The 5.5-year ISB was at a yield rate of 5.57%. It hiked to 5.97% by the end of Friday.

The 10-year ISB, which reaches maturity in July 2026, was at 6.64%, and jumped to 7.14%.

The Government was able to raise $ 1.5 billion in May 2017 with a 10-year maturity at a yield of 6.2% per annum. Yield rates of this ISB were at 6.7% during the last week of October and rose to 7.23% last week.
In April 2018, the CBSL issued $ 1.25 billion 5-year and $ 1.25 billion 10-year ISBs with maturity dates in April 2023 and April 2028, with 5.75% and 6.75% yield rates, respectively. This is the largest bond offering raised by Sri Lanka, surpassing the $ 2.15 billion raised in 2015.

The 5-year bond’s yield rate was 5.86% before the Easter incident and has increased to 6.26% now. Yield rates of the 10-year bond were 6.81% and increased to 7.32% now.

In March this year, CBSL returned to USD bond markets, pricing a new issuance of $ 1 billion 5-year and $ 1.4 billion 10-year bonds with maturity dates of March 2024 and March 2029, respectively.

The 5-year bond’s yield rates were 6.14% as at 18 April and went up to 6.61% on Friday, while the 10-year bond’s yield rates went up to 7.51% from 7.06%.