Govt. request for Rs. 15 bln bond triggers ‘insider trading’ allegations

A Sri Lanka government request to the Central Bank (CB) to raise Rs. 15 billion through a bond issue for loan repayments from infrastructure projects, led to the CB accepting Rs. 10 billion in a recent bond issue that triggered speculation of insider trading, officials said

“There is no impropriety. At the time, the Rs. 1 billion bond issue closed (on February 26), there had been a request for Rs 15 billion to pay off loans. So when the February 26 bond issue received bids of upto Rs. 20 billion, we decided to accept Rs. 10 billion. Yes the rates also went up but that was market driven,” CB Governor Arjuna Mahendran, in the eye of the storm, told the Business Times on Friday morning.

Meanwhile the Economic Affairs and Policy Planning Ministry was due to release a statement on Friday defending allegations of insider trading in a bond issue by the Central Bank, Deputy Minister Harsha de Silva said.

“We are issuing a statement on this,” he said, when asked about the allegations that were swirling in Colombo money markets.

Money market dealers allege that Perpetual Capital said to be controlled by Mahendran’s son-in-law Arjun Aloysius benefited from the deal. They say that while most dealers offered interest rates of less than 12 per cent, this particular company had offered 12 ½ per cent for a quantity of Rs. 3 billion. The CB had eventually accepted a total of Rs. 10 billion in subscriptions at a rate ranging from 9 + per cent to 12.5 per cent. “How did they know the regulator was going to accept 10 times the subscribed amount to make a high bid and at higher than market rates?” one dealer asked.

In response, Mr. Mahendran said there were other dealers who had also offered bids in excess of Rs. 1 billion adding that the CB in the past too has accepted bids over and above the requested amount. He said his son-in-law is no longer with the firm which is owned by the Aloysius family. – ENDS -