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Treasury bills are short-term debt instruments issued by the Central Bank of Sri Lanka on behalf of the Government of Sri Lanka with fixed maturity periods, 3 months, 6 months and 1 year at specified rates of interest determined at weekly auctions. Default risk is zero owing to the Government guarantee. Bills are issued at a discount and the investor receives the face value at maturity (i.e. investor receives interest upfront). No withholding tax is applicable to this instrument. It is highly liquid investment tool since it is tradable in the secondary market. Treasury Bonds are medium and long term Government debt instruments issued by the Central Bank of Sri Lanka with semi-annual coupon payments at a fixed rate. The maturity periods range between 2 to 20 years. No withholding tax is applicable to this instrument and since repayment is guaranteed by the Government of Sri Lanka, default risk stands at zero.
A Repurchase Agreement or Repo is a risk-free money market investment instrument where there is an agreement for the simultaneous sale and repurchase of a security. It is considered a default-free instrument since it is backed by Government securities. A Repo is where the Bank agrees to borrow funds from the customer against collateral, usually a Treasury Bill or Bond, for a specified tenor and an agreed rate of interest, which is payable at maturity. A key advantage for investors is that no withholding tax is applicable to this instrument. There is flexibility in terms of the investment period, where the investor can specify the maturity date of the investment. A Reverse Repo transaction is where the Bank lends funds to the customer, usually for a short tenor, against collateral. This is a money market instrument that is usually used to raise short-term capital. Sri Lanka Development Bonds (SLDB)
are USD- denominated instruments issued by the Government of Sri Lanka, where interest is paid semi-annually on a variable rate based on a 6 month LIBOR rate plus a fixed margin. Returns are tax-free in Sri Lanka. Eligible investors are foreign citizens and entities, non-resident Sri Lankans, Sri Lankan dual citizens, Authorized Dealers, Primary Dealers and other specified Companies. Minimum investment amount is USD 10,000/-