Developing a Deep and Liquid Bond Market - Experience of Sri Lanka

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Developing a Deep and Liquid Bond Market - Experience of Sri Lanka. Presentation by K.G.D.D.Dheerasinghe Assistant to the Governor Central Bank of Sri Lanka. Development of the Bond Market Events of Significance. - PowerPoint PPT Presentation

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<ul><li><p>Developing a Deep and Liquid Bond Market - Experience of Sri LankaPresentation by K.G.D.D.DheerasingheAssistant to the GovernorCentral Bank of Sri Lanka</p></li><li><p>Development of the Bond MarketEvents of Significance1923 - Issue of loans commenced under the Colonial Treasury Bill Ordinance by Crown Agents in U.K.1937 - Issue of Rupee Loans commenced under RSSO No.7 of 19371941 - Issue of Treasury Bills commenced under LTBO (Chapter 287)1950 - Public debt management was vested with the Central Bank under the Monetary Law Act.1981 - A secondary market window was opened for Treasury Bills by the Central Bank. 1986 - Weekly Treasury Bill auctions commenced1992 - Primary Dealers were appointed.</p></li><li><p>Development of the Bond Market contd...1993 - Repo window for Treasury Bills was introduced by the CBSL.1994 - Primary Dealer system was recognised.1995 - Non-competitive bidding at primary auctions was phased out.1995 - Reverse Repo window was introduced by the CBSL.RSSO, LTBO and MLA were amended to enable scripless issue of Treasury Bills and Treasury Bonds.1997 - Issue of Treasury Bonds commenced.2000 - Dedicated Primary Dealers were appointed2000 - Primary Dealer supervision commenced.</p></li><li><p>Development of the Bond Market contd...2001 - US Dollar denominated Sri Lanka Development Bonds were issued.2002 - Fiscal Management Responsibility Act was enacted.2003 - Issue of 10,15 &amp; 20 year Treasury Bonds commenced.2003 - Bloomberg Bond Trading System for Primary Dealers was introduced.2004 - RSSO,LTBO &amp; MLA were amended to enable the trading of scripless securities.Scripless Securities Settlement System (SSSS) and Central Depository System (CDS) commenced operations.</p></li><li><p>Legal Framework(a) Appropriation Act - Authority for annual borrowing limit(b) Local Treasury Bills Ordinance - Issuence of T-Bills(c ) Registered Stock &amp; Securities Ordinance - Issuence of T-Bonds &amp; Rupee Loans(d) Foreign Loans Act - Borrowing from foreign sources(e) Monetary Law Act - Debt management as a function of Central Bank(f) Fiscal Management Responsibility Act - Guidelines and debt sustainability</p></li><li><p>Organizational FrameworkPARLIAMENT - authority to borrow and accountable to the public MINISTER OF FINANACE - delegates authority to Central Bank MINISTRY OF FINANCE / TREASURY-Principal - authority &amp; accountability - Contracting non-commercial foreign borrowing CENTRAL BANK - Agent- Iisuence and debt service PRIMARY DEALERS- market makingBANKS, PENSION/PROVIDENT/INSURANCE FUNDS - Investors and Secondary Market Dealers</p></li><li><p>Implementation of the Government Securities ProgrammePreparation of the borrowing calendarRelease of information to the market Regular meeting of the Debt Management Committee ( weekly)Regular meeting with Primary Dealers (weekly)Issuance of domestic debt: e.g. Auction, Tap, Placements</p></li><li><p>Organization of Public Debt DepartmentFront Office - market/public relations, primary issuance, market information, investor awareness</p><p>Middle Office - research inputs, risk analysis, issuance techniques, product development, database</p><p>Back Office - payment and settlement, servicing of concessional foreign debt, CS-DRMS</p><p>Support Services- human resources, training, IT support, maintenance.</p></li><li><p>Budget Deficit and Borrowing Requirement (as a % of GDP) 1997 2000 2003Total Revenue 18.5 16.6 15.7Total Expenditure 26.4 26.7 23.7Overall Deficit - 7.9 - 9.9 - 8.0Finanacing 7.9 9.9 8.0 Foreign 1.9 0.4 2.9 Domestic 3.4 9.4 4.5 Other/Privatization 2.5 0.1 0.6</p></li><li><p>Sheet1</p><p>Table 1</p><p>Composition of Tradeble &amp; Non Tradeble debt in domestic debt</p><p>199720002003</p><p>value (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1. Tradable debt</p><p>1.1 Treasury Bonds10,0002.74204,12433.85483,10750.81</p><p>(medium - long term)</p><p>1.2 Treasury Bills114,99631.55134,99622.39219,29523.06</p><p>(short term 91-364 days)</p><p>2. Non Tradable</p><p>Rupee Loans239,47565.70263,88843.76248,41426.13</p><p>Total364,471100.00603,008100.00950,816100.00</p><p>Source : PDD, Central Bank of Sri Lanka</p><p>Table 2</p><p>Distribution of Bonds by issues</p><p>1997-9820002002-03</p><p>value (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1 Government10,00078.94125,32298.39214,79798.63</p><p>2 Corporate2,66821.062,0561.612,9791.37</p><p>Total12,668100.00127,378100.00217,776100.00</p><p>Source : PDD, Central Bank of Sri Lanka &amp; CSE.</p><p>Note. Corporate debt issues are for 1998, 2000 and 2002.</p><p>Table 3</p><p>Ownership of Government Securities</p><p>199720002003</p><p>Ownervalue (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1. Domestic Debt</p><p>1.1 Banking Sector</p><p>Central Bank19,7702.5997,7788.0244,5872.39</p><p>Commercial Banks80,76610.57101,2528.31183,8249.86</p><p>1.2 Non-Bank Sector</p><p>Savings Institutions63,0288.2587,2637.16138,9397.45</p><p>Sinking Funds1000.011000.011000.01</p><p>Insurance Funds9,2921.2218,9691.5624,8281.33</p><p>Provident and Pension Funds144,40618.90218,61517.94333,28917.88</p><p>Official Funds15,4382.0224,6402.0240,7392.19</p><p>Private Business and Individuals48,6386.37120,1169.86246,20913.21</p><p>1.3 Other6,3020.827,9270.657,4530.40</p><p>2. Foreign Debt376,33149.25542,04044.48843,88245.28</p><p>Total764,071100.001,218,700100.001,863,850100.00</p><p>Source : PDD, Central Bank of Sri Lanka</p><p>Table 4</p><p>Transaction Numbers &amp; Volumes of the SSS System</p><p>PeriodNumber of TransactionsVolume (Rs. Mil)</p><p>February - 20045,696481,719.01</p><p>March - 200414,037503,271.56</p><p>April - 200411,500523,349.47</p><p>01-10, May - 200464091,086.42</p><p>Total31,8731,599,426.46</p><p>Source : CDS, PDD, Central Bank of Sri Lanka</p><p>Table 5</p><p>Growth of Depository Accounts of CDS</p><p>PeriodNo.of A/Cs</p><p>February - 200410,893</p><p>March - 200412,483</p><p>April - 200413,781</p><p>May - 200413,846</p><p>Source : CDS, PDD, Central Bank of Sri Lanka</p><p>Table 6</p><p>Domestic Financing of Fiscal Deficit(Rs. billions)</p><p>(Rs. billions)199720002003</p><p>By Instrument39.6118.579.7</p><p>Long term Bonds1090.6137.1</p><p>Short Term Bills-4.76.114.9</p><p>Non-tradable Securities33.51.8-39.3</p><p>US$ denominated Bonds---15.2</p><p>Other Loans-9.515.8-18.3</p><p>Long term Bonds</p><p>By Source39.6118.579.7</p><p>Bank Borrowing-2.256.5-20.9</p><p>Non-Bank Borrowing41.862100.7</p><p>Source : Central Bank of Sri Lanka</p><p>Table7</p><p>Government Domestic Debt Indicators</p><p>199720002003</p><p>Govt. Debt/GDP85.896.9105.9</p><p>Domestic Debt/GDP43.653.857.9</p><p>Total Debt Service/GDP9.41419.6</p><p>Domestic Debt Service/ Govt. Revenue38.667.9108</p><p>Domestic Debt Service/ Govt. Expenditure23.431.646.9</p><p>Domestic Interest/GDP5.54.96.4</p><p>Domestic Interest/ Govt. Current Expenditure2724.539.9</p><p>Source : Central Bank of Sri Lanka</p><p>Sheet2</p><p>Sheet3</p></li><li><p>Sheet1</p><p>Table 1</p><p>Composition of Tradeble &amp; Non Tradeble debt in domestic debt</p><p>199720002003</p><p>value (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1. Tradable debt</p><p>1.1 Treasury Bonds10,0002.74204,12433.85483,10750.81</p><p>(medium - long term)</p><p>1.2 Treasury Bills114,99631.55134,99622.39219,29523.06</p><p>(short term 91-364 days)</p><p>2. Non Tradable</p><p>Rupee Loans239,47565.70263,88843.76248,41426.13</p><p>Total364,471100.00603,008100.00950,816100.00</p><p>Source : PDD, Central Bank of Sri Lanka</p><p>Table 2</p><p>Distribution of Bonds by Issuer</p><p>1997-9820002002-03</p><p>value (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1 Government10,00078.94125,32298.39214,79798.63</p><p>2 Corporate2,66821.062,0561.612,9791.37</p><p>Total12,668100.00127,378100.00217,776100.00</p><p>Source : PDD, Central Bank of Sri Lanka &amp; CSE.</p><p>Note. Corporate debt issues are for 1998, 2000 and 2002.</p><p>Table 3</p><p>Ownership of Government Securities</p><p>199720002003</p><p>Ownervalue (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1. Domestic Debt</p><p>1.1 Banking Sector</p><p>Central Bank19,7702.5997,7788.0244,5872.39</p><p>Commercial Banks80,76610.57101,2528.31183,8249.86</p><p>1.2 Non-Bank Sector</p><p>Savings Institutions63,0288.2587,2637.16138,9397.45</p><p>Sinking Funds1000.011000.011000.01</p><p>Insurance Funds9,2921.2218,9691.5624,8281.33</p><p>Provident and Pension Funds144,40618.90218,61517.94333,28917.88</p><p>Official Funds15,4382.0224,6402.0240,7392.19</p><p>Private Business and Individuals48,6386.37120,1169.86246,20913.21</p><p>1.3 Other6,3020.827,9270.657,4530.40</p><p>2. Foreign Debt376,33149.25542,04044.48843,88245.28</p><p>Total764,071100.001,218,700100.001,863,850100.00</p><p>Source : PDD, Central Bank of Sri Lanka</p><p>Table 4</p><p>Transaction Numbers &amp; Volumes of the SSS System</p><p>PeriodNumber of TransactionsVolume (Rs. Mil)</p><p>February - 20045,696481,719.01</p><p>March - 200414,037503,271.56</p><p>April - 200411,500523,349.47</p><p>01-10, May - 200464091,086.42</p><p>Total31,8731,599,426.46</p><p>Source : CDS, PDD, Central Bank of Sri Lanka</p><p>Table 5</p><p>Growth of Depository Accounts of CDS</p><p>PeriodNo.of A/Cs</p><p>February - 200410,893</p><p>March - 200412,483</p><p>April - 200413,781</p><p>May - 200413,846</p><p>Source : CDS, PDD, Central Bank of Sri Lanka</p><p>Table 6</p><p>Domestic Financing of Fiscal Deficit(Rs. billions)</p><p>(Rs. billions)199720002003</p><p>By Instrument39.6118.579.7</p><p>Long term Bonds1090.6137.1</p><p>Short Term Bills-4.76.114.9</p><p>Non-tradable Securities33.51.8-39.3</p><p>US$ denominated Bonds---15.2</p><p>Other Loans-9.515.8-18.3</p><p>Long term Bonds</p><p>By Source39.6118.579.7</p><p>Bank Borrowing-2.256.5-20.9</p><p>Non-Bank Borrowing41.862100.7</p><p>Source : Central Bank of Sri Lanka</p><p>Table7</p><p>Government Domestic Debt Indicators</p><p>199720002003</p><p>Govt. Debt/GDP85.896.9105.9</p><p>Domestic Debt/GDP43.653.857.9</p><p>Total Debt Service/GDP9.41419.6</p><p>Domestic Debt Service/ Govt. Revenue38.667.9108</p><p>Domestic Debt Service/ Govt. Expenditure23.431.646.9</p><p>Domestic Interest/GDP5.54.96.4</p><p>Domestic Interest/ Govt. Current Expenditure2724.539.9</p><p>Source : Central Bank of Sri Lanka</p><p>Sheet2</p><p>Sheet3</p></li><li><p>Sheet1</p><p>Table 1</p><p>Composition of Tradeble &amp; Non Tradeble debt in domestic debt</p><p>199720002003</p><p>value (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1. Tradable debt</p><p>1.1 Treasury Bonds10,0002.74204,12433.85483,10750.81</p><p>(medium - long term)</p><p>1.2 Treasury Bills114,99631.55134,99622.39219,29523.06</p><p>(short term 91-364 days)</p><p>2. Non Tradable</p><p>Rupee Loans239,47565.70263,88843.76248,41426.13</p><p>Total364,471100.00603,008100.00950,816100.00</p><p>Source : PDD, Central Bank of Sri Lanka</p><p>Table 2</p><p>Distribution of Bonds by issues</p><p>1997-9820002002-03</p><p>value (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1 Government10,00078.94125,32298.39214,79798.63</p><p>2 Corporate2,66821.062,0561.612,9791.37</p><p>Total12,668100.00127,378100.00217,776100.00</p><p>Source : PDD, Central Bank of Sri Lanka &amp; CSE.</p><p>Note. Corporate debt issues are for 1998, 2000 and 2002.</p><p>Table 3</p><p>Ownership of Government Securities</p><p>199720002003</p><p>Ownervalue (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1. Domestic Debt</p><p>1.1 Banking Sector</p><p>Central Bank19,7702.5997,7788.0244,5872.39</p><p>Commercial Banks80,76610.57101,2528.31183,8249.86</p><p>1.2 Non-Bank Sector</p><p>Savings Institutions63,0288.2587,2637.16138,9397.45</p><p>Sinking Funds1000.011000.011000.01</p><p>Insurance Funds9,2921.2218,9691.5624,8281.33</p><p>Provident and Pension Funds144,40618.90218,61517.94333,28917.88</p><p>Official Funds15,4382.0224,6402.0240,7392.19</p><p>Private Business and Individuals48,6386.37120,1169.86246,20913.21</p><p>1.3 Other6,3020.827,9270.657,4530.40</p><p>2. Foreign Debt376,33149.25542,04044.48843,88245.28</p><p>Total764,071100.001,218,700100.001,863,850100.00</p><p>Source : PDD, Central Bank of Sri Lanka</p><p>Table 4</p><p>Transaction Numbers &amp; Volumes of the SSS System</p><p>PeriodNumber of TransactionsVolume (Rs. Mil)</p><p>February - 20045,696481,719.01</p><p>March - 200414,037503,271.56</p><p>April - 200411,500523,349.47</p><p>01-10, May - 200464091,086.42</p><p>Total31,8731,599,426.46</p><p>Source : CDS, PDD, Central Bank of Sri Lanka</p><p>Table 5</p><p>Growth of Depository Accounts of CDS</p><p>PeriodNo.of A/Cs</p><p>February - 200410,893</p><p>March - 200412,483</p><p>April - 200413,781</p><p>May - 200413,846</p><p>Source : CDS, PDD, Central Bank of Sri Lanka</p><p>Table 6</p><p>Domestic Financing of Fiscal Deficit(Rs. billions)</p><p>(Rs. billions)199720002003</p><p>By Instrument39.6118.579.7</p><p>Long term Bonds1090.6137.1</p><p>Short Term Bills-4.76.114.9</p><p>Non-tradable Securities33.51.8-39.3</p><p>US$ denominated Bonds---15.2</p><p>Other Loans-9.515.8-18.3</p><p>Long term Bonds</p><p>By Source39.6118.579.7</p><p>Bank Borrowing-2.256.5-20.9</p><p>Non-Bank Borrowing41.862100.7</p><p>Source : Central Bank of Sri Lanka</p><p>Table7</p><p>Government Domestic Debt Indicators</p><p>199720002003</p><p>Govt. Debt/GDP85.896.9105.9</p><p>Domestic Debt/GDP43.653.857.9</p><p>Total Debt Service/GDP9.41419.6</p><p>Domestic Debt Service/ Govt. Revenue38.667.9108</p><p>Domestic Debt Service/ Govt. Expenditure23.431.646.9</p><p>Domestic Interest/GDP5.54.96.4</p><p>Domestic Interest/ Govt. Current Expenditure2724.539.9</p><p>Source : Central Bank of Sri Lanka</p><p>Sheet2</p><p>Sheet3</p></li><li><p>Sheet1</p><p>Table 1</p><p>Composition of Tradeble &amp; Non Tradeble debt in domestic debt</p><p>199720002003</p><p>value (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1. Tradable debt</p><p>1.1 Treasury Bonds10,0002.74204,12433.85483,10750.81</p><p>(medium - long term)</p><p>1.2 Treasury Bills114,99631.55134,99622.39219,29523.06</p><p>(short term 91-364 days)</p><p>2. Non Tradable</p><p>Rupee Loans239,47565.70263,88843.76248,41426.13</p><p>Total364,471100.00603,008100.00950,816100.00</p><p>Source : PDD, Central Bank of Sri Lanka</p><p>Table 2</p><p>Distribution of Bonds by issues</p><p>1997-9820002002-03</p><p>value (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1 Government10,00078.94125,32298.39214,79798.63</p><p>2 Corporate2,66821.062,0561.612,9791.37</p><p>Total12,668100.00127,378100.00217,776100.00</p><p>Source : PDD, Central Bank of Sri Lanka &amp; CSE.</p><p>Note. Corporate debt issues are for 1998, 2000 and 2002.</p><p>Table 3</p><p>Ownership of Government Securities</p><p>199720002003</p><p>Ownervalue (Rs. Mil)%value (Rs. Mil)%value (Rs. Mil)%</p><p>1. Domestic Debt</p><p>1.1 Banking Sector</p><p>Central Bank19,7702.5997,7788.0244,5872.39</p><p>Commercial Banks80,76610.57101,2528.31183,8249.86</p><p>1.2 Non-Bank Sector</p><p>Savings Institutions63,0288.2587,2637.16138,9397.45</p><p>Sinking Funds1000.011000.011000.01</p><p>Insurance Funds9,2921.2218,9691.5624,8281.33</p><p>Provident and Pension Funds144,40618.90218,61517.94333,28917.88</p><p>Official Funds15,4382.0224,6402.0240,7392.19</p><p>Private Business and Individuals48,6386.37120,1169.86246,20913.21</p><p>1.3 Other6,3020.827,9270.657,4530.40</p><p>2. Foreign Debt376,33149.25542,04044.48843,88245.28</p><p>Total764,071100.001,218,700100.001,863,850100.00</p><p>Source : PDD, Central Bank of Sri Lanka</p><p>Table 4</p><p>Transaction Numbers &amp; Volumes of the SSS System</p><p>PeriodNumber of TransactionsVolume (Rs. Mil)</p><p>February - 20045,696481,719.01</p><p>March - 200414,037503,271.56</p><p>April - 200411,500523,349.47</p><p>01-10, May - 200464091,086.42</p><p>Total31,8731,599,426.46</p><p>Source : CDS, PDD, Central Bank of Sri Lanka</p><p>Table 5</p><p>Growth of Depository Accounts of CDS</p><p>PeriodNo.of A/Cs</p><p>February - 200410,893</p><p>March - 200412,483</p><p>April - 200413,781</p><p>May - 200413,846</p><p>Source : CDS, PDD, Central Bank of Sri Lanka</p><p>Table 6</p><p>Domestic Financing of Fiscal Deficit(Rs. billions)</p><p>199720002003</p><p>By Instrument39.6118.579.7</p><p>Long term Bonds1090.6137.1</p><p>Short Term Bills-4.76.114.9</p><p>Non-tradable Securities33.51.8-39.3</p><p>US$ denominated Bonds---15.2</p><p>Other Loans-9.515.8-18.3</p><p>By Source39.6118.579.7</p><p>Bank Borrowing-2.256.5-20.9</p><p>Non-Bank Borrowing41.862100.7</p><p>Source : Central Bank of Sri Lanka</p><p>Table7</p><p>Government Domestic Debt Indi...</p></li></ul>