Expanding Bond Horizons

November 2006 | Market Strategy

Sri Lanka's central bank governor has announced plans for the country's first sovereign bond sale in 2007, to finance much needed infrastructure projects. Given the island's hefty fiscal deficit and its expansionary budget plans, Sri Lanka's decision to seek external financing is a necessary one. The new bond should see respectable demand, given its rarity and the likelihood of high yield offered. However, the worsening war situation poses downside risks for price action. Fitch's long term foreign and local currency rating is BB-, with a negative outlook.

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