Again a Bond Scam

[Future123]

Possibly Arjuna Mahendran's son in law's firm bought these bonds and sold it to EPF with a massive profit.

http://www.sundaytimes.lk/160306/business-times/suspicion-over-recent-treasury-bond-purchases-185119.html


‘Suspicion’ over recent Treasury bond purchases
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Deals by two ‘influential’ money market traders who purchased large stocks of Treasury bonds and sold it at a premium a few weeks later to the Employees Provident Fund (EPF) are raising many questions, dealers said. ”We have no proof or evidence but the process appeared to be very suspicious,” one dealer said, adding that the deals have been over the past few months.

Dealers said that the two traders unusually bid at a higher rate for large blocks. A few weeks later these institutions sold the bonds to EPF at a profit while the state agency, which is eligible to buy in the primary market on its own, stands to lose on the deal. “Why didn’t the EPF buy in the primary market?” asked one dealer. The last crisis to hit the market was in February 2015 when questions were raised over the CB’s 10-billion rupee bond sale which was sold at higher than normal rates.

[balapas]

Company Involved In Alleged Central Bank Bond Scam Records Mammoth Increase In Profits

Perpetual Treasuries Limited, a primary gilt dealership, connected the family of a controversial former Sri Lanka central bank governor, has made a profit of 5.1 billion rupees for the year to March 2016 up 434 percent from a year earlier, published data show.

The firm reported capital gains of 5.2 billion rupees from bond trading in the year to March 2016, up 581 percent from 767 million rupees a year earlier, accounts published in Sri Lanka's Sunday Observer newspaper showed.

Under central bank regulations, all primary dealers have to publish their accounts.

Return on beginning-of-the-equity of 1,065 million was 481 percent.

Sri Lanka's bond markets were hit by a series of controversial bond auctions involving allegations rigging and insider dealing in 2015 and 2016 during the tenure of ex-Central Bank Governor Arjuna Mahendran.

Perpetual Treasuries is connected to Mahendran's son-in-law and he came under fire over conflicts of interest as long term bonds were sold at high rates where large volumes.

Mahendran has denied wrongdoing.

Interest income at Perpetual Treasuries rose 162 percent to 942.8 million rupees and interest expenses rose 132 percent to 589.1 million rupees, and net interest income rose 233 percent to 353 million rupees.

The majority of profits of a primary dealer however comes from capital gains. Primary dealers in government securities, bids at government bond auctions and sell them to other buyers making a margin.

The price of a government bond rise when interest rates falls and the price falls when interest rates go up.

When rates fall, a dealer with a portfolio can sell and make profits from bond bought at a higher interest rate (low price). Interest rate volatility provides opportunities for dealers to make gains by selling down their portfolio.

Concerns were raised that after selling government bonds at high interest rates (low prices) by accepting sharply higher volumes of bids from favoured dealers effectively rigging the auctions, the bonds were then dumped dealers at low rates (high prices) on the Employees Provident Fund, which was managed by the central bank.

(Economy Next)


http://asianmirror.lk/news/item/19364-company-involved-in-alleged-central-bank-bond-scam-records-mammoth-increase-in-profits

[yellow knife]

[Future123]

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