Sri Lanka Dollar Bonds Face Selloff Amid Political Uncertainty

A selloff in Sri Lanka dollar bonds intensified on Monday (10) as investors reduced their country exposure over rising political uncertainties before elections later this month, reported Bloomberg.

The country’s dollar bonds due in 2030 fell 3 cents on the dollar to 49.9 cents, the lowest level since February, extending their decline from their peak this year to about 15%. Notes due in 2027 dropped more than 1 cent to 49.6 cents.

Market pressure has intensified before elections on September 21 as investors worry that a shakeup in leadership could upset debt talks that have stalled near the finish line.

Opposition leaders have said they would look to renegotiate the terms of Sri Lanka’s program with the International Monetary Fund.

“It is looking probable that Sri Lanka will need to further refine the terms of the deal agreed with bondholders” and will struggle to do so before the election, said Eng Tat Low, an emerging-market sovereign analyst at Columbia Threadneedle Investment. “Whilst I expect volatility to persist, the sharp selloff we have seen over the past few sessions may attract some ‘bargain hunting’ activities.”

Source: Bloomberg / Yahoo