New scheme for Sri Lankan Treasury Bond sales

Sri Lanka’s Central Bank (CB) on Tuesday announced a new scheme for the issue of Treasury bonds (T-bonds).

While the CB, under Governor Indrajith Coomaraswamy, has said in the past that a new, more transparent scheme was being contemplated, Tuesday’s announcement comes on the back of shocking revelations before a Commission probing two bond scams over the past two days.
While Foreign Minister and former Finance Minister Ravi Karunanayake has reportedly being in staying at a penthouse in Colombo for which the rent was paid by Arjun Aloysius from suspect trader Perpetual Treasuries, Mr. Aloysius – whose company figured prominently in the two tainted bond deals in February 2015 and March 2016 - was ordered to hand over his mobile phone and laptop to the Commission on Monday.
The CB said that from Thursday, July 27 a new system will replace the existing fully auction based issuance system for T-bonds, that has been in practice since February 2015. 
The main purpose of introducing the new system is to further enhance the efficiency and transparency of the domestic borrowings of the Government, the CB said in a media release.
The new system is more structured and includes regular monthly T-bond auctions. Each monthly auction offers two T-bond series of different maturities and tenures of the series are expected to match the resource availability in the market.
“Issuance under each series takes effect in three or less sequential phases depending on the outcome of each preceding phase. Phase I explores issuance of the entire announced volume in a competitive multiple price auction system through reasonable market bids. However, in the event of any under allocation at Phase I, the Phase II opens for voluntary, volume based bidding,” it said. 
A new performance review mechanism will be introduced to assess the effective participation of PDs. Meanwhile, in order to improve the investment planning of PDs and investors at large, a quarterly T-bond auction calendar will be published in the CB website in advance, the release added. - ENDS -