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COLOMBO: The Sri Lankan government raised 110.44 billion rupees through a bond sale on Monday, well below its 180-billion-rupee target, with the central bank saying it was rejecting almost all bids for the two-year paper offered in the sale.
The central bank received bids for just 441 million rupees for the two-year paper against a target of 70 billion rupees ($219 million), despite traders bidding at market levels.
Earlier in the day traders predicted that cuts – the lowest price or highest yield at which bids are accepted – were likely to be set at around 31%-32% on the two-year debt.
The central bank eventually set the cut-off yield at 29.99% and received bids worth 77.5 billion rupees, the statement showed.
The four-year paper was fully sold for a total of 110 billion rupees at a final yield of 28.11%.
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“It is likely that the central bank felt that the two-year yield was higher than what they wanted and delayed raising funds until rates could become more favorable,” said a trader who declined to be named by that he is not authorized to speak to the media. .
Sri Lanka expects a $2.9 billion bailout deal to be finalized with the International Monetary Fund (IMF) on March 20, which analysts have said could further reduce the country’s risk premiums and cut rates.
Traders had predicted that the large bond sale, the biggest issued in three months, would be partly to repay a 100 billion rupee bond due to be redeemed on March 15.
With the money raised through the sale on Monday, it is unlikely that the government will have much money left over and may need to raise money again soon.
Sri Lanka is going through its worst financial crisis in more than seven decades after a plunge in its foreign reserves left the island struggling to pay for vital imports and forced it into foreign debt default last May.
Squeezed by rising inflation, currency depreciation and high interest rates, Sri Lanka’s economy is forecast to have shrunk by 8% last year, Moody’s said in its latest statement.
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