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Bloomberg
Sri Lanka’s volatile dollar bonds are set to jump the most in Asia this month after its central bank unexpectedly raised interest rates earlier in August in a move that may help boost the country’s foreign exchange reserves.
But default concerns remain for the notes, with S&P Global Ratings last week cutting the outlook on its junk CCC+ ratings for the country to negative, citing risks that attempts to boost reserves may fall short of the government’s expectations.
The dollar notes have gained 2.9% in August, the biggest increase across Asia, according to a Bloomberg index. The bonds had been falling for the month until the rate hike, and they were the worst performers in the previous two months. The debt fell 0.1% after the S&P move.
Any increase in reserves totalling $2.8 billion at the end of July would help Sri Lanka address debt maturities next year totalling $1.5 billion. The nation has already used a part of that stockpile to repay
$1 billion of bonds last month.