India-based CRISIL, a rating and research agency, has sent a proposal to the Central Bank (CB) on the setting up of an index similar to the stock market indices as a way to measure the performance of Treasury Bills (TB) and bonds, CB officials said.
"They sent a proposal recently and we are looking at it," a CB official told the Business Times. He said that setting up such indices calls for funding and the CB is analysing the cost structures.
This follows a visit by a team from CRISIL, a subsidiary of Standard and Poor, had with NDB AVIVA Wealth Management last month. "We had discussions with both the CB and the Securities and Exchange Commission (SEC) and we would like to work with them to create indices for fixed income securities in the island," Mukesh Agarwal, Senior Director of CRISIL Research told the Business Times at the time.
He noted that they have analyzed data from the Sri Lankan government's security market and have proposed structuring four indices covering Treasury Bills and Bonds and that these securities are quite similar to those in India.
A SEC source said that such an index on the bonds and TB are needed now that the local fixed income securities are set to take off.
Bond markets in Sri Lanka are being dominated by government securities with comparatively low retail investor participation, analysts observed, noting that with fixed income securities it can be difficult for investors to understand their risk - return. If there's a benchmark such as an index, investors can understand the risks," Mr. Agarwal added.