SRI LANKA DEBT SECURITIES MARKET Government Treasury Bills & Treasury Bond 1 Country Sri Lanka Currency Sri Lankan Rupee (Rs.) Trade Organizations SAFTA, WTO Population,7, (1) Exports US$,3 Mn (. % Growth) Q, 1 Imports US $ 1,9 Mn ( 1.1% Growth) Q, 1 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 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 th Floor, Landmark Building, No.3, Galle Road, Colombo 3, Sri Lanka www.kenangasl.com Report Prepared by: A.Rasheed Sheriff (Trainee Research Analyst)
January March May July September November January March May July September November January March May July September November January March May July September US $ Mn Snapshot of the Sri Lankan Economy GDP Growth 9 7 3 1 1..3. 1...1 3. 7 9 1 11 9.1 1 1 - -1-1 Composition of Domestic Debt 11 Treasury Bonds % Sri Lanka Developm ent Bond 7% Other % Treasury Bills 1% Rupee Securities % GDP Growth % Inflation Rate Budget Deficit ( % of GDP) 1 1-7 9 1 11 1-1 -1 Trade Deficit Exports Imports Changes in CCPI 9-1 1 1 9 1 11 1 Year on Year 1 Month Moving Average
Overview Of The Bond Market The Bond Market in Sri Lanka commenced active operations in the 199 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 1% 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. 1 Bn worth of bonds in 1 January as compared to Rs. 199 Bn in 11 January. 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.
.1.9 3.1.9 1.3.9 3..9 1..9 3.7.9 3..9 11.9.9 9.1.9 3.1.9 1.1.1 3..1 17..1 1.7.1 3.7.1..1 7..1 9.9.1 1.1.1 1..11 1.3.11 1.7.11 1.9.11 17.1.1 1..1..1 11..1..1.1.9 3.1.9 1.3.9 3..9 1..9 3.7.9 3..9 11.9.9 9.1.9 3.1.9 1.1.1 3..1 17..1 1.7.1 3.7.1..1 7..1 9.9.1 1.1.1 1..11 1.3.11 1.7.11 1.9.11 17.1.1 1..1..1 11..1..1.1.9 3.1.9 1.3.9 3..9 1..9 3.7.9 3..9 11.9.9 9.1.9 3.1.9 1.1.1 3..1 17..1 1.7.1 3.7.1..1 7..1 9.9.1 1.1.1 1..11 1.3.11 1.7.11 1.9.11 17.1.1 1..1..1 11..1..1 7.1.7.1.7 3..7 1..7..7..7.1. 1.1. 1...... 1...1.9.1.9 7..9..9 3..9..9 3.1.1 1.1.1..1..1 1..1..1.1.11 7.1.11..11 3..11 1..11 3..11.1.1 3..1 1..1..1 3..1 % Per Annum 3 1 1 Movements of Treasury Bill Rates 7-1 7 9 1 11 1 91 Days 1 Days 3 Days Year on Year CCPI 1 1 Treasury Bond Movements 9-1 1 1 9 1 11 1 year 3 year year 1 1 1 1 1 1 1 1 1 9 1 11 1 year year year 7 year 1 1 1 1 11. 11 1. 1 9. 9. 9 1 11 1 year 1 year 1 year year
US $ Mn. Percentage Percentage US $ Bn US $ Mn Government Debt Performance 11 1 9 7 3 1 Government Financing 7 9 1 11 1 1 1 Treasury Bill Treasury Bonds 91 Days 1 Days 3 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 $ 19,7 Mn in to US $,73 Mn in 1 of which T-bonds accounted for.1% of Debt in and.% in 1 as compared to T-bill which accounted for 1.91 % in and 1.3 % in 1 Sri Lanka Development bond debt increased from US $ 1,7 Mn in to US $ 1,73 Mn in 1 more than a 3.97 % increase. 1 9 7 3 1 1...... Total Debt Payments 7 9 1 11 Interest Payment Repayments of Debt Reserves of foreign exchange and gold Forieng Repayments % Foreign Interest Payment % Source: Ministry of Finance Sri Lanka Government Debt Indicators 7 9 1 11 3 3 1 1 3 1 % Foreign Debt/ GDP Government Total Debt/ GDP 3 US $ Composition of the Government Foreign Debt Interest Payment as a % of GDP Source: Ministry of Finance Sri Lanka 1 7 9 1 11 Government Revenue Government Debt Budget Deficit
US $ Mn US $ Mn. SECONDARY MARKET ACTIVITY OF TREASURY BILL WEIGHTED AVERAGE YIELD RATES 91 Days Bills 1 Days Bills 3 Days Bills YEAR Sold (%) Purchased (%) Sold (%) Purchased (%) Sold (%) Purchased (%) 7.3.1.. 19.9. 17. 17.7 1. 1.1 19. 19. 9 7. 7... 9. 9. 1 7.3 7. 7.33 7.3 7.3 7. 11...7. 9. 9.3 1 1.9 11.1 11. 11.9 1.1 1. Sri Lanka Development Bonds SLDB United States Dollar denominated Sri Lankan Government bonds with tenures of & 3 years issued through designated agents. Key features are, Interest paid semi-annually and computed on variable rate based on month LIBOR plus a fixed margin. Minimum investment at the auction is USD 1,/=. In the secondary market minimum investment is USD 1,/=. 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. US $ Millions, 1, 1, 1, 1, 1, - SLDB 7 9 1 11 1,.,. Commercial Foreign Debt by Source,. 3 3 1 1 7 9 1 11 Budget Deficit 91 Days 1 1 3,.,. 1,. - 9 1 11 International Soveriegn Bonds Non - resident Investments in T Bills Non- resident investments in T Bonds other Source: Ministry of Finance Sri Lanka 1 Days 3 Days Source: Ministry of Finance Sri Lanka
Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Comparison Between Sri Lanka And Key Countries In Asia: India, Indonesia, Singapore and Malaysia 1 1 1 1 1 Year Treasury Bond Movement Country Comparison 9 1 11 1 Sri Lanka India Singapore Malaysia Indonesia Source: Trading Economics 1 Interest Rate Movement Country Comparison 1 9 1 11 1 Sri Lanka India Malaysia Singapore Indonesia Source: Trading Economics.11.11.1.1.9.9. Singapore Dollar (SGD) against LKR.9...7.7. US Dollar (US $) against LKR. 7. 7.. Indonesian Rupiah (IDR) against LKR Singapore Dollar (SGD) US Dollar (US $) Indonesian Rupiah (IDR) Malaysian Ringgit (MYR) againt LKR Indian Rupee (INR) againt LKR..........3.3 Malaysian Ringgit (MYR) Indian Rupee (INR) Source: currency.me.uk
Rs. 1.1.1 3.1. 1.1.3 1.1. 1.1. 1.1. 3.1.7 1.1..1.9 1.1.1 1.1.11 1.1.1 1.1.1 3.1. 1.1.3 1.1. 1.1. 1.1. 3.1.7 1.1..1.9 1.1.1 1.1.11 1.1.1 Mundell Fleming Model Effects of M money supply on deficit, Foreign reserves and thereby US $, Inflation and Interest Rates Mundell Fleming Model Graph 1, 1, 1,,,,, - 7 9 1 11 1 Trade Deficit Foreign Reserves M Money Supply US $ 1 Month Slibor CCPI YoY 1 1 1 Interest Rate Movements (SLIBOR Vs. LIBOR). 1. 1. 1. 1. 1........ 1. 1..... 1. 1... 1 month 1 Month (LIBOR) 3 months ( SLIBOR) 3 Month ( LIBOR) months ( SLIBOR) Month (LIBOR). Exchange Rate Movements 7-1.. 1. 1. 1. 1. 1..... - 7 9 1 11 1 US$ 19.9 17.73 11. 11.9 19.77 1.9 GBP 19. 199.1 17.3 173.7 17.9 197. EURO 1.7 17.9 1. 1.3 11.79 19.99 SGD 7.71 7.9 7.3..7 99.1 JYP.93 1. 1.1 1.7 1.37 1.7 US$ GBP EURO SGD JYP