Sri Lanka’s Dollar Bonds Fall as Investors React to Political Uncertainty ahead of Elections
By: Staff Writer
September 10 (LNW):On Monday, September 9, Sri Lanka’s dollar bonds experienced a sharp decline as investors grew increasingly concerned about political instability leading up to the upcoming elections.
The country’s bonds due in 2030 dropped by 3 US cents, hitting 49.9 US cents—the lowest level since February—marking a 15% decrease from their peak earlier this year. Bonds due in 2027 also fell, losing over 1 US cent to reach 49.6 US cents, Bloomberg news agence reported.
The pressure in the market has mounted as the September 21 elections approach, with fears that a change in leadership could disrupt ongoing debt negotiations, which have nearly reached a conclusion.
Opposition leaders have expressed intentions to renegotiate Sri Lanka’s agreement with the International Monetary Fund (IMF).
Eng Tat Low, an emerging-market sovereign analyst at Columbia Threadneedle Investment, noted that Sri Lanka might need to further adjust the terms of its agreement with bondholders, a task that could be challenging before the elections. However, Low also suggested that the recent sharp selloff might attract some bargain hunters.
Anura Kumara Dissanayake, also known as AKD, leads the National People’s Power, a coalition of leftist parties and groups supported by those who protested against the Rajapaksa government in 2022.
His campaign is focused on clean governance and fighting corruption, with a commitment to renegotiate with the IMF. His party opposes the current debt restructuring framework agreed upon with the IMF.
Dissanayake is emerging as a significant challenger to the current President Ranil Wickremesinghe, who has faced criticism for implementing austerity measures as part of an IMF bailout.
Eric Fang, a fund manager at Eastspring Investments in Singapore, commented that investors seem to be adjusting their positions in anticipation of the elections. Fang believes that any major price corrections could present a buying opportunity, given the sovereign’s recovery trajectory and the fairness of the debt deal for both the issuer and investors
