The Central Bank of Sri Lanka (CBSL), on behalf of the government, successfully launched and priced a US$ 650 million 10-year International Sovereign Bond (Issue) at a yield of 6.125 percent per annum on May 28, 2015.
On the same day, CBSL successfully issued US$ 329 million Sri Lanka Development Bonds (SLDBs) of 1 year 1 month maturity at a Weighted Average Margin (WAM) of 316.69 bps and US$ 9 million SLDBs of 2 years 11 months maturity at a WAM of 353.89 bps, over 6 month London Interbank Offered Rate (LIBOR). Accordingly, a total of US$ 988 million was raised via International Sovereign Bonds and SLDBs at a weighted average cost of 5.261 percent per annum.
The Issue represents the eighth US Dollar benchmark offering in the international bond markets by Sri Lanka since 2007. The compression in yield of 25 basis points reflects the continued confidence that the international investors have placed in the sovereign bond issuance of Sri Lanka. The final order books stood at US$ 2 billion, an oversubscription ratio of 3.08 times, from 173 accounts. Distribution was very well diversified, with Asia taking 23 percent, Europe 27 percent and the US at 50 percent. Global Fund Managers were the largest investors in the transaction, representing 79 percent, with Banks, Pension Funds/Insurance and Private Banks taking 9 percent, 7 percent and 5 percent respectively.
With this transaction, this Issue represents the first Sovereign Bond Issue for Sri Lanka in the international capital markets in 2015, post the change in government. This Issue also succeeded in achieving a ten-year cost of funds which is inside the current Sri Lanka US$ secondary levels and at tighter spread vs. the US Treasury compared to the last ten-year Sri Lanka US$ in 2012. This achievement is all the more impressive, given the recent volatility in US Treasury yields and anticipated Fed rate hike later this year.