Sri Lanka to hire Euroclear to boost appeal of bonds

Reuters: Cabinet has approved a proposal to employ a global stock and bond settlement house to help boost foreign investment in its Government bonds, a Cabinet document showed on Thursday.

The move comes at a time of heavy outflows from Government bonds, which analysts say stems from expectations of higher interest rates in the United States. Foreign investors were net sellers of $325.7 million of securities in the seven weeks ending 15 February, more than 2016’s total net outflow of $324.3 million, according to Central Bank and Government data.

In the document, the Government said Belgium-based Euroclear submitted a proposal to work to popularise Government securities among foreign investors, attracting stable investment, while streamlining settlement mechanisms.

The Government also said hiring Euroclear could help reduce Sri Lanka’s borrowing costs due to potential higher demand for its bonds from international investors.

Last year, when presenting a budget for 2017, Finance Minister Ravi Karunanayake proposed to use Euroclear’s facilities to improve outreach for the country’s Treasury bond market.