Central Bank Treasury Bond Auctions & Secondary Market Transactions
Central Bank of Sri Lanka (CBSL)•Yahapalana Government (2015–2019)
What Happened?
Strictly neutral, evidence-based factual reconstruction from state audit, parliamentary and court records.
Issuance of 30-year Treasury Bonds through an open auction on February 27, 2015, where an advertised Rs. 1.0 Billion auction was abruptly expanded to accept Rs. 10.058 Billion at elevated cutoff yield rates.
Rs. 10.058 Billion in 30-year long-term sovereign bonds with coupon rate of 12.5%.
To conduct a scheduled regular auction to raise Rs. 1 Billion in 30-year government debt securities as advertised to primary dealers.
CBSL Governor ordered the acceptance of bids up to Rs. 10.058 Billion despite the original advertisement of Rs. 1 Billion, resulting in a spike in yield rates from 9.5% to over 11.73%. Primary dealer Perpetual Treasuries Limited, bidding directly and through intermediaries, acquired the bulk of the issue and offloaded bonds to state funds including the EPF at substantial profits.
The Presidential Commission of Inquiry (2017) documented that Perpetual Treasuries made an unconscionable profit of Rs. 11,145 million (Rs. 11.14 Billion). Special forensic audits commissioned by CBSL (KPMG and BDO) identified yield depression losses to the Employees' Provident Fund and public balance sheet exceeding Rs. 9.9 Billion.
COPE inquiry led by Sunil Handunnetti MP (2016) determined regulatory irregularities and recommended criminal prosecution. Attorney General indicted former Governor Arjuna Mahendran, Arjun Aloysius, and 8 others in Colombo High Court Trial-at-Bar under the Public Property Act.
The Original Deal
2015-02-2730-year maturity with semi-annual coupon payments at 12.5% yield.
Government budget deficit financing for capital works.
The Actual Cost
SourcedDocumented Financial Consequence
Documented loss represents the PCoI documented unconscionable profit of Rs. 11.145 Billion extracted through artificial yield distortion and secondary market sales to the EPF and public accounts.
Follow the Money: Central Bank Treasury Bond Auctions & Secondary Market Transactions
Public Debt Department, Central Bank of Sri Lanka
Advertises 30-year Treasury Bond auction for Rs. 1,000 Million.
CBSL Official Auction Bulletin
Procurement Process & Approvals
NON COMPLIANT"PCoI and forensic audits revealed that direct bid expansion without market pre-notification violated established public debt auction norms."
Auditor General Observations
NON COMPLIANCE"NON-COMPLIANCE: The abrupt deviation from the advertised auction borrowing limit to accept an amount ten times higher led to immediate yield rate escalation and secondary market distortions."
Establish automated electronic bidding ceilings and strict separation between the CBSL Governor and the Public Debt Tender Board.
COPE Report on the Irregularities in Treasury Bond Issuance of 27 February 2015
Committee on Public Enterprises chaired by Sunil Handunnetti found that former Governor Arjuna Mahendran was directly responsible for the irregular expansion of the auction and recommended criminal investigations.
232 counts under the Public Property Act No. 12 of 1982 and the Penal Code for criminal breach of trust, conspiracy, and insider dealing causing wrongful loss to public funds.
No corruption charges documented.
Governance Context & Decision Authorities
Government officials and ministers are recorded solely for historical administrative context. Criminal and civil allegations are subject to final judicial determination.
Tender Board accepted Rs. 10.058 Billion following direct verbal instructions from Governor Arjuna Mahendran.
Purchased bonds on the secondary market from Perpetual Treasuries at elevated premium prices.
No documented beneficiaries established in official judicial findings.
Sourced Chronological Timeline
Every milestone and date is indexed to verified state or judicial documentation.
Controversial 30-Year Bond Auction Held
Advertised Rs. 1 Billion auction expanded to Rs. 10.058 Billion.
COPE Committee Report Presented
COPE Chairman Sunil Handunnetti presents report recommending legal action.
Presidential Commission of Inquiry Concludes
PCoI submits final report documenting Rs. 11.14 Billion unconscionable profit.
Attorney General Files 232 Indictments
High Court Trial-at-Bar case HCB 125/2019 initiated.