Green Exchange

rnThe Central Bank will roll over US$ 91.5 mn worth of paper when it comes up for renewal on June 28 and issue fresh bills for the balance US$ 158.

rnThe issue, which does not have a put option, will not be rated. It carries a minimum two-year tenure and will be linked to the six months London interbank offered rate or LIBOR.

rnPrimary dealers expect the bond yields to be priced at around 175 basis points above the six-month LIBOR.rn

rnThe six months LIBOR is now trading at 1.54 percent.rn

rnThe issue will be marketed through banks and primary dealers giving investors the option of bidding for maturities higher than two years, but within the stipulated interest rate.rn

rnThe bond will be offered in denominations of US$ 10,000 each with a minimum US$ 100,000 investment.rn

rnPrimary dealers expect the bulk of the issue to be taken up by commercial banks, which presently borrow dollars at higher long-term rates to pay their Non Resident Foreign Currency Depositors and for their trade-related business. rn

rn"This (issue) will be a safe investment for banks to park their dollars and pay off their NRFC depositors," a private bank dealer added. rn

rnProceeds from the bond sale would go towards plugging the gaping budget deficit.rn

rnUnder the present political climate, the government isnt expected to get a projected Rs. 13 bn in privatisation proceeds.

rnPresident Chandrika Kumaratungas minority government has agreed to several pre-conditions set out by its coalition partner, the Janatha Vimukthi Peramuna or JVP. Among the Marxist partys conditions is a halt in the countrys privatisation plans.

rnThe Treasury has also been called in to subsidise essentials like fuel, wheat and fertilizer prices. The government is yet to spell out its revenue collection plans.

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-LBO Newsdesk: LBOEmail@vanguardlanka.comrn