PDMO rejects all Domestic Dollar Bond bids; market says bid rates too high

Tuesday, 27 October 2026 02:03 - - {{hitsCtrl.values.hits}}

Turns down every bid at 23 Oct. auction for $ 100 m issue, which had option to raise up to $ 300 m
Notice cites only issuer’s right to accept or reject any application; no other details given

The Public Debt Management Office (PDMO) has rejected all bids received at its Domestic Dollar Bond auction held on 23 October, with market sources indicating that demand was encouraging, but the rates bid were too high.

The issue was for $ 100 million, with the option of raising up to $ 300 million. “Pursuant to Section 6 of the Offer Document, which reserves the Issuer’s right to accept or reject any application, in whole or in part, the Issuer has decided not to accept any bids received under this auction,” the PDMO said in its notice, giving no further details.

The fixed rate of interest payable on the bonds, which are US dollar-denominated debt securities issued in the domestic market, was to be determined through competitive bidding.

Market sources said the PDMO probably believed the bids did not factor in Fitch Ratings’ recent upgrade of Sri Lanka.

In September, Fitch upgraded Sri Lanka’s Long-Term Issuer Default Rating to ‘B-’ from ‘CCC+’, with a Stable outlook. A higher rating typically lowers the risk premium investors demand over benchmark US Treasury yields, which together determine dollar bond pricing.

Given the availability of funds and current global uncertainties, the PDMO may be willing to wait before returning to the market, the sources said. Accepting costlier bids could also have set a higher benchmark for future foreign currency borrowing.

This was the second Domestic Dollar Bond issue since the debt crisis. In the first, in December 2025, the PDMO raised $ 50 million under a fixed-rate arrangement, recording firm demand for one- and two-year maturities. The one-year tranche drew $ 45.5 million in bids, of which $ 33 million was accepted at a weighted average fixed rate of 5.7%. The two-year tenor received $ 42.5 million in bids, with $ 17 million accepted at a weighted average rate of 6.1%. Only $ 1 million was bid for the three-year maturity, and no bids were accepted.