$ 110M SLDB Auction: Only $0.82M raised via Private Placement

By Paneetha Ameresekere | Published: 2:00 AM Jul 31 2021

By Paneetha Ameresekere

The Central Bank of Sri Lanka (CBSL) was able to raise only US$ 0.82 million of Sri Lanka Development Bonds (SLDBs) by a private placement following an auction held on Tuesday (27), CBSL data released on Thursday (29), showed.

Those comprised US$ 0.3 million of nine months tenure at a fixed weighted average rate (FWAR) of 7.69 per cent, US$ 0.19 million of two year tenure at a FWAR of 7.98 per cent and US$ 0.33 million of a five-year tenure at a FWAR of 7.60 per cent respectively.

CBSL, via the private placement and by auction raised a total of US$ 59.36 million, nonetheless off target by 46.04 per cent (US$ 50.64 million) over the original target of US$ 110 million that it planned, due to higher rates demanded by investors. The amount raised by the auction was US$ 58.54 million at the same rates fetched via the private placement. The value of total bids received at the auction was US$ 58.64 million, a mere US$ 0.1 million (0.17 per cent) more than the final amount sold via the auction.

Auction sales comprised US$ 48.01 million of nine months tenure at a FWAR of 7.69 per cent, US$ 4.51 million of one year and eight months tenure at a FWAR of 7.67 per cent, US$ 1.06 million of two year tenure at a FWAR of 7.98 per cent and US$ 4.96 million of a five year tenure at a FWAR of 7.60 per cent, respectively. No private placement sales were affected for the one year and eight months tenure, only an auction sale.

Total raised vis-à-vis the private placement where applicable and auction was US$ 48.31 million of nine months tenure at a FWAR of 7.69 per cent, US$ 4.51 million of one year and eight months tenure at a FWAR of 7.67 per cent, US$ 1.25 million of two year tenure at a FWAR of 7.98 per cent and US$ 5.29 million of a five year tenure at a FWAR of 7.60 per cent, respectively.

Generally, investors of SLDBs are local banks investing the money of NRFC and RFC accountholders in such SLDB instruments.  Considering a FWAR of 7.69 per cent paid for a nine month tenure of SLDBs at Tuesday’s sale, that means by proxy NRFC and RFC accountholders who generally also include exporters, whereas pensioners and private sector retirees who generally invest in Treasury (T) Bills are discriminated against by getting a poor, fixed, maximum administered yield of a mere 5.21 per cent on their one year (12 months) T Bill holding investments.

While the Government /Central Bank of Sri Lanka (CBSL) have fixed local rupee denominated interest rates low to spur growth, in the obverse, US dollar investments in SLDBs by NRFC/RFC holders who include exporters are allowed to be market determined. 

By Paneetha Ameresekere | Published: 2:00 AM Jul 31 2021

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