sri lanka government securities market
TRANSCRIPT
Go
ve
rnm
en
t T
rea
sury
Bil
ls &
Tre
asu
ry B
on
d
20
12
SR
I L
AN
KA
DE
BT
SE
CU
RIT
IES
MA
RK
ET
Country Sri Lanka
Currency Sri Lankan Rupee (Rs.)
Trade Organizations SAFTA, WTO
Population 20,278,000 (2012)
Exports US$ 5,663 Mn (8.5 %
Growth) Q2, 2012
Imports US $ 10,902 Mn (
14.1% Growth) Q2,
2012
Sovereign Debt Rating Of Sri Lanka
S & P Rating B+ (Outlook Positive)
Moody’s B1 (Outlook Positive)
FITCH BB- (Outlook Stable)
Kenanga Investment Corporation Ltd
4th Floor, Landmark Building,
No.385, Galle Road,
Colombo 03,
Sri Lanka
www.kenangasl.com
Abbreviations:
CCPI : Colombo Consumer Price Index
SLIBOR : Sri Lanka Interbank Borrowing Rate
SLDB : Sri Lanka Development Bond
AWDR : Average Weighted Deposit Rate
AWFDR : Average Weighted Fixed Deposit Rate
AWPR : Average Weighted Prime Lending Rate
Report Prepared by: A.Rasheed Sheriff
(Trainee Research Analyst)
Snapshot of the Sri Lankan Economy
-15000
-10000
-5000
0
5000
10000
15000
20000
2006 2007 2008 2009 2010 2011 2012
US
$ M
n
Trade Deficit Exports Imports
0
5
10
15
20
25
Jan
uar
y
Mar
ch
May
July
Sep
tem
ber
No
vem
ber
Jan
uar
y
Mar
ch
May
July
Sep
tem
ber
No
vem
ber
Jan
uar
y
Mar
ch
May
July
Sep
tem
ber
No
vem
ber
Jan
uar
y
Mar
ch
May
July
Sep
tem
ber
2009 2010 2011 2012
Changes in CCPI 2009-2012
Year on Year 12 Month Moving Average
Sri Lanka Development Bond
7% Other
5%
Treasury Bills 21%
Rupee Securities
2%
Treasury Bonds 65%
Composition of Domestic Debt 2011
6.8 6
3.5
8 8.3 18.8
14.4
5 6.8
4.1
9.1
-15
-10
-5
0
5
10
15
20
25
0
1
2
3
4
5
6
7
8
9
2007 2008 2009 2010 2011
GDP Growth
GDP Growth % Inflation Rate Budget Deficit ( % of GDP)
Source: Central Bank of Sri Lanka
Key Institutional Investors
The Employee Provident Fund ( EPF) is on of the most significant investors in the Treasury bonds and bills market. National Savings Bank (NSB) and the Employees Trust Fund (ETF) also play significant roles.
Overview Of The Bond Market
The Bond Market in Sri Lanka commenced active operations in the 1990’s
Debt management of the GoSL is shifting from issuing non-marketable instruments (e.g. Rupee Loans) and Short term Marketable instruments (e.g. Rupee Loans) and Short Term marketable instruments (e.g. Treasury Bills) to medium and long term marketable instruments.
A withholding tax of 10% is charged at the hands of the investor, and the investor will not be subject to any further taxation.
No stamp Duty is payable on these bills/bonds.
All receipts of interest, maturity proceeds and capital gains are fully repatriable.
According to the Central Bank data foreign investors held Rs. 212 Bn worth of bonds in 2012 January as compared to Rs. 199 Bn in 2011 January.
Source: Central Bank of Sri Lanka
0
5
10
15
20
25
30 0
7.1
2.2
00
7
05
.10
.20
07
03
.08
.20
07
01
.06
.20
07
06
.04
.20
07
02
.02
.20
07
05
.12
.20
08
10
.10
.20
08
01
.08
.20
08
20
.06
.20
08
04.0
4.20
08
01
.02
.20
08
04
.12
.20
09
02
.10
.20
09
07
.08
.20
09
05
.06
.20
09
03
.04
.20
09
06
.02
.20
09
03
.12
.20
10
01
.10
.20
10
06
.08
.20
10
04
.06
.20
10
01.0
4.20
10
05
.02
.20
10
02
.12
.20
11
07
.10
.20
11
05
.08
.20
11
03
.06
.20
11
01
.04
.20
11
03
.02
.20
11
05
.10
.20
12
03
.08
.20
12
01
.06
.20
12
05.0
4.20
12
03
.02
.20
12
2007 2008 2009 2010 2011 2012
% P
er
An
nu
m
Movements of Treasury Bill Rates 2007-2012
91 Days 182 Days 364 Days Year on Year CCPI
0
5
10
15
20
0
5
10
15
20
25
05
.01
.20
09
23
.01
.20
09
16
.03
.20
09
23
.04
.20
09
01
.06
.20
09
03
.07
.20
09
03
.08
.20
09
11
.09
.20
09
09
.10
.20
09
23
.10
.20
09
01
.01
.20
10
03
.05
.20
10
17
.05
.20
10
01
.07
.20
10
23
.07
.20
10
06
.08
.20
10
27
.08
.20
10
09
.09
.20
10
15
.12
.20
10
01
.02
.20
11
01
.03
.20
11
15
.07
.20
11
15
.09
.20
11
17
.01
.20
12
15
.02
.20
12
02
.04
.20
12
11
.05
.20
12
02
.08
.20
12
2009 2010 2011 2012
Rat
e %
Treasury Bond Movements 2009-2012
2 year 3 year 4 year
0
2
4
6
8
10
12
14
16
18
0
2
4
6
8
10
12
14
16
05
.01
.20
09
23
.01
.20
09
16
.03
.20
09
23
.04
.20
09
01
.06
.20
09
03
.07
.20
09
03
.08
.20
09
11
.09
.20
09
09
.10
.20
09
23
.10
.20
09
01
.01
.20
10
03
.05
.20
10
17
.05
.20
10
01
.07
.20
10
23
.07
.20
10
06
.08
.20
10
27
.08
.20
10
09
.09
.20
10
15
.12
.20
10
01
.02
.20
11
01
.03
.20
11
15
.07
.20
11
15
.09
.20
11
17
.01
.20
12
15
.02
.20
12
02
.04
.20
12
11
.05
.20
12
02
.08
.20
12
2009 2010 2011 2012
Rat
e %
5 year 8 year 6 year 7 year
8
8.5
9
9.5
10
10.5
11
11.5
0 2 4 6 8
10 12 14 16
05
.01
.20
09
23
.01
.20
09
16
.03
.20
09
23
.04
.20
09
01
.06
.20
09
03
.07
.20
09
03
.08
.20
09
11
.09
.20
09
09
.10
.20
09
23
.10
.20
09
01
.01
.20
10
03
.05
.20
10
17
.05
.20
10
01
.07
.20
10
23
.07
.20
10
06
.08
.20
10
27
.08
.20
10
09
.09
.20
10
15
.12
.20
10
01
.02
.20
11
01
.03
.20
11
15
.07
.20
11
15
.09
.20
11
17
.01
.20
12
15
.02
.20
12
02
.04
.20
12
11
.05
.20
12
02
.08
.20
12
2009 2010 2011 2012
Rat
e %
5 year 10 year 15 year 20 year Source: Central Bank of Sri Lanka
Source: Central Bank of Sri Lanka
Source: Central Bank of Sri Lanka
Source: Central Bank of Sri Lanka
Government Debt Performance
0
5
10
15
20
25
0
100
200
300
400
500
600
700
800
900
1000
1100
2006 2007 2008 2009 2010 2011 2012
Rat
e %
US
$ M
n
Government Financing
Treasury Bill Treasury Bonds 91 Days 182 Days 364 Days
Domestic Debt raised through
Treasury Bills and Bonds
The Total Domestic Debt of Sri Lanka is made
up of Short term treasury bills, Central bank
advances; Medium & Long term Treasury
bonds, Rupee Loans and SLDB’s.
Total Domestic debt increased from US $
19,765 Mn in 2008 to US $24,763 Mn in 2012
of which T-bonds accounted for 60.21% of
Debt in 2008 and 64.65% in 2012 as
compared to T-bill which accounted for 18.91
% in 2008 and 21.63 % in 2012
Sri Lanka Development bond debt increased
from US $ 1,474 Mn in 2008 to US $ 1,732 Mn
in 2012 more than a 38.97 % increase.
0
5
10
15
20
25
30
35
40
0
10
20
30
40
50
60
70
80
90
100
2006 2007 2008 2009 2010 2011
Pe
rcen
tage
Pe
rce
nta
ge
Government Debt Indicators
Foreign Debt/ GDP
Government Total Debt/ GDP
US $ Composition of the Government Foreign Debt
Interest Payment as a % of GDP
0
10
20
30
40
0.00
2.00
4.00
6.00
8.00
10.00
2007 2008 2009 2010 2011
%
US
$ B
n
Total Debt Payments
Interest Payment Repayments of Debt Reserves of foreign exchange and gold Forieng Repayments % Foreign Interest Payment %
0
10000
20000
30000
40000
50000
2007 2008 2009 2010 2011
US
$ M
n.
Government Revenue Government Debt Budget Deficit Source: Ministry of Finance Sri Lanka
Source: Ministry of Finance Sri Lanka
Source: Central Bank of Sri Lanka
S
SECONDARY MARKET ACTIVITY OF TREASURY BILL WEIGHTED AVERAGE YIELD RATES
91 Days Bills 182 Days Bills 364 Days Bills
YEAR W.A. Yield Rate
Sold (%) W.A. Yield Rate Purchased (%)
W.A. Yield Rate Sold (%)
W.A. Yield Rate Purchased (%)
W.A. Yield Rate Sold (%)
W.A. Yield Rate Purchased (%)
2007 20.23 20.51 20.00 20.25 19.96 20.25
2008 17.25 17.27 18.50 18.51 19.02 19.08
2009 7.25 7.50 8.25 8.50 9.20 9.40
2010 7.23 7.28 7.33 7.38 7.53 7.56
2011 8.55 8.65 8.75 8.80 9.20 9.30
2012 10.90 11.10 11.60 11.90 12.15 12.20
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2007 2008 2009 2010 2011 2012
US
$
Mill
ion
s SLDB
SLDB
Sri Lanka Development Bonds
United States Dollar denominated Sri
Lankan Government bonds with tenures of
2 & 3 years issued through designated
agents. Key features are,
Interest paid semi-annually and computed
on variable rate based on 6 month LIBOR
plus a fixed margin.
Minimum investment at the auction is USD
100,000/=. In the secondary market
minimum investment is USD 10,000/=.
Offered via competitive auctions to
designated agents.
Foreign Citizens and Entities, Non Resident
Sri Lankans, Sri Lankan dual citizens,
Authorized Dealers, Primary Dealers and
Specified companies that have entered
into agreements with the Board of
Investment of Sri Lanka and Insurance
Companies registered under the
Regulation of Insurance Industry Act.
Securities are redeemed at par upon
maturity Income tax paid in Sri Lanka will
be reimbursed by the issuer.
-
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
2009 20010 2011
US
$ M
n.
Commercial Foreign Debt by Source
International Soveriegn Bonds Non - resident Investments in T Bills Non- resident investments in T Bonds other 0
5
10
15
20
25
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2007 2008 2009 2010 2011
Rat
e %
US
$ M
n
Budget Deficit 91 Days
182 Days 364 Days
Source: Central Bank of Sri Lanka
Source: Central Bank of Sri Lanka
Source: Ministry of Finance Sri Lanka
Source: Ministry of Finance Sri Lanka
Comparison Between Sri Lanka And Key Countries In Asia: India, Indonesia,
Singapore and Malaysia
0
2
4
6
8
10
12
14
16
2009 2010 2011 2012
Rat
e %
10 Year Treasury Bond Movement Country Comparison
Sri Lanka India Singapore Malaysia Indonesia
0
2
4
6
8
10
12
2008 2009 2010 2011 2012
Rat
e %
Interest Rate Movement Country Comparison
Sri Lanka India Malaysia Singapore Indonesia Source: Trading Economics
Source: Trading Economics
Source: Trading Economics
0.0065
0.0070
0.0075
0.0080
0.0085
0.0090
Jan
-12
Feb
-12
Mar
-12
Ap
r-1
2
May
-12
Jun
-12
Jul-
12
Au
g-1
2
Sep
-12
Oct
-12
US Dollar (US $) against LKR
US Dollar (US $)
0.0085 0.0090 0.0095 0.0100 0.0105 0.0110 0.0115
Jan
-12
Feb
-12
Mar
-12
Ap
r-1
2
May
-12
Jun
-12
Jul-
12
Au
g-1
2
Sep
-12
Oct
-12
Singapore Dollar (SGD) against LKR
Singapore Dollar (SGD)
65.00
70.00
75.00
80.00
Jan
-12
Feb
-12
Mar
-12
Ap
r-1
2
May
-12
Jun
-12
Jul-
12
Au
g-1
2
Sep
-12
Oct
-12
Indonesian Rupiah (IDR) against LKR
Indonesian Rupiah (IDR)
0.0200
0.0220
0.0240
0.0260
0.0280
Malaysian Ringgit (MYR) againt LKR
Malaysian Ringgit (MYR)
0.3600
0.3800
0.4000
0.4200
0.4400
0.4600
Indian Rupee (INR) againt LKR
Indian Rupee (INR) Source: currency.me.uk
0
20
40
60
80
100
120
140
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2007 2008 2009 2010 2011 2012
Mundell Fleming Model Graph
Trade Deficit Foreign Reserves M2 Money Supply US $ 12 Month Slibor CCPI YoY
0.00
5.00
10.00
15.00
20.00
25.00
1.12
.200
1
3.12
.200
2
1.12
.200
3
1.12
.200
4
1.12
.200
5
1.12
.200
6
3.12
.200
7
1.12
.200
8
2.12
.200
9
01.1
2.20
10
01.1
2.20
11
01.1
0.20
12
Rat
e %
6 months ( SLIBOR) 6 Month (LIBOR)
2007 2008 2009 2010 2011 2012
US$ 109.95 107.73 114.20 112.29 109.77 125.49
GBP 219.64 199.15 178.23 173.07 175.29 197.54
EURO 150.27 157.89 158.54 148.35 151.79 159.99
SGD 72.71 75.94 78.30 82.06 86.74 99.21
JYP 0.93 1.04 1.21 1.27 1.37 1.57
-
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
220.00
240.00
Rs.
Exchange Rate Movements 2007-2012
US$ GBP EURO SGD JYP
Mundell Fleming Model – Effects of M2 money supply on deficit, Foreign reserves and thereby US $, Inflation and Interest Rates
Interest Rate Movements (SLIBOR Vs. LIBOR)
0.00
5.00
10.00
15.00
20.00
25.00
Rat
e %
3 months ( SLIBOR) 3 Month ( LIBOR)
0.00 2.00 4.00 6.00 8.00
10.00 12.00 14.00 16.00 18.00 20.00
1.12
.200
1
3.12
.200
2
1.12
.200
3
1.12
.200
4
1.12
.200
5
1.12
.200
6
3.12
.200
7
1.12
.200
8
2.12
.200
9
01.1
2.20
10
01.1
2.20
11
01.1
0.20
12
Rat
e %
1 month 1 Month (LIBOR)
Source: Central Bank of Sri Lanka
Source: Central Bank of Sri Lanka
Source: Central Bank of Sri Lanka