Dev. bond issue two times oversubscribed, all bids taken

* Risk premium higher than 2011 lows


A US$ 60 million three year Sri Lanka Development Bond (SLDB) offer was two times oversubscribed with the Public Debt Department of the Central Bank accepting all bids amounting to US$ 121.05 million with the issue closing yesterday (17) with risk premiums higher than last year’s lows.

"The Central Bank of Sri Lanka, on behalf of the Government of Sri Lanka, offered to issue Sri Lanka Development Bonds (SLDBs) of US$ 60 million in 3-year tenor to eligible investors for subscription at a rate of US Dollar 6 month LIBOR plus a margin to be determined through competitive bidding," the Central Bank said on Monday.

"The offer was opened from 10 – 17 September 2012 for bidding with the settlement on 24 September 2012. Foreign and local commercial banks operating in Sri Lanka subscribed bids at the auction. The offer was oversubscribed by two times with total bids received amounting to US$ 121.05 million. In view of the high demand by the investors, the Government decided to accept US$ 121.05 million in three year maturity at the market determined rates of US Dollar 6 month LIBOR + 400 bps (weighted average margin). On Monday (07), the US Dollar 6 month LIBOR rate was 0.67 percent. With this transaction, the Government succeeded in achieving a lower margin compared to the 410 bps of the previous three-year SLDB issue in June 2012," the Central Bank said.

The SLDB in June attracted a risk premium of 410 basis points, slightly higher than the 385 basis points for a three year SLDB issue last March. A four year SLDB offered also in March attracted a risk premium of 415 basis points.

An SLDB issue in March 2009 attracted a risk premium of 540 basis points, another issue in August that same year saw the risk premium decline to 450 basis points which fell further in another issue in March 2010, attracting a risk premium of 380 basis points for a three year SLDB and 395 basis points for a four year bond.

Risk premiums declined to their lowest in June 2011, with an SLDB issue for two tenures attracting risk premiums of 365 basis points and 375 basis points.

The latest SLDB issue was executed in terms of Section 2 (a) and 2 (c) of the Foreign Loans Act No. 29 of 1957 as amended. The SLDBs are transferable by endorsement, delivery and registration with the Superintendent of Public Debt of the Central Bank of Sri Lanka. Eligible investors may purchase SLDBs in the secondary market through Designated Agents appointed by the Central Bank of Sri Lanka.

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