Sri Lanka’s sovereign bond orders top USD4.5 bln: source

HONG KONG/COLOMBO July 11 (Reuters) - Sri Lanka's first dual-tranche sovereign bond orders exceeded $4.5 billion while the final guidance for both tranches fell at least 25 basis points from the initial guidance, a source close to the deal told Reuters. The source said the final guidance for the 5.5-year tranche was about 5.8 percent (+/-5BPS) lower than initial guidance which was in the area of 6.125 percent. For the 10-year bond final guidance was around 6.875 percent (+/-5BPS) lower than the initial guidance of around 7.125 percent. In comparison, bonds due 2021 and 2025 are trading at a yield of 5.5 percent and 6.6 percent respectively. "It may be absorbed given the lack of supply. We are yet to see if it will perform well in the secondary market given the valuation," said a Singapore-based analyst. He said the 10-year tranche looks fairly valued on the current levels and the 5.5-year bond yield will be a attractive for investors as long as it does not fall below 6 percent. Three sources close to the deal said the island nation could raise up to $1.5 billion, as book building began in Asia early on Monday. Finance Minister Ravi Karunanayake told Reuters the government saw an opportunity in the capital market through dual-tranche bonds. "After the Brexit, investors are looking for safe-heavens and I think dual tranche is an opportunity to get these investors attracted to our bond deals." Moody's assigned a B1 rating to Sri Lanka's global bond offering provisionally, and said it expected to remove provisional status of the rating upon the closing of the proposed issuance and review of final terms. Asian sovereign bonds have rallied this year as investors looked for yields in a low rate environment. According to JACI benchmarks, dollar bonds issued by Sri Lanka produced total returns of 10.11 percent in the year to date, more than established issuers such as the Philippines. According to Thomson Reuters data, hard currency bond primary issuance volumes in Asia ex-Japan ex-Australia are down 11.3 percent in the first half of the year with high yield volumes down 56.4 percent. Citigroup, Deutsche Bank, HSBC and Standard Chartered are joint bookrunners. The deal is expected to be rated B1/B+/B+, in line with the issuer, and should price on Monday. Last October, Sri Lanka sold a $1.5 billion 10-year bond at 6.85 percent.