Sri Lanka is now evaluating bids from seven international investment banks to float another 500 million US dollar bond which is expected to hit markets in October.
Standard and Poor's recently upgraded the outlook on Sri Lanka's 'B' speculative sovereign rating to 'stable' from 'negative' in August, on the expectations of better policy and strong foreign reserves following a deal with the International Monetary Fund.
Fitch, which has rated the country a notch higher at 'B+' also lowered the outlook to 'negative' amid foreign reserves losses of the central bank.
But Sri Lanka's foreign reserves have zoomed to over 3.0 billion US dollars following a float of the rupee in late March and the IMF also approving a 2.6 billion US dollar stand by arrangement.
Fitch's head of Asia Sovereign ratings James McCormack said the balance of payments no longer weighed on the ratings, but budgets were a concern.
An IMF mission is currently in the island on an interim review before disbursing a second 300 million US dollar tranche.
The bond has traded at a yield of around 7.80 percent this week, the head of Sri Lanka's public debt office C P J Siriwardene said.
"From July we have seen an improvement of about 25 basis points a week," he said.
"We expect this steady improvement in the near future too and [the yield] to reach somewhere around 7.0 percent."
Siriwardene said local investors have also bought the bond at above par.
Sri Lanka's first 500 million sovereign bond was issued in 2007 for five years.
The bond fell amid international turmoil and an intensifying conflict at home, to yield over 20 percent at one point.
But the end of a 30-year internal conflict has brightened prospects for the country.