#07 Facts You Must Know About Bond Issue






The problem over treasury bonds has become a major problem in our country. Since the reality beyond the story is still a curiosity without evidences, we hereby intend to reveal the truth gradually.



  • What is this “Perpetual Treasuries”?





“Perpetual Treasuries” is the company related to this story which was permitted as a debtor company of Central bank of Sri Lanka in 2013. This is a subsidiary of “The Perpetual group of companies” which started its business in 2014. The owner of the group of companies is Arjun Aloysius, the grandson of Kata Aloysius, one of the millionaires in Sri Lanka.


  • Who is Arjun Aloysius?




He is the owner of this group of companies. He is  a local and international educational personality who joined his grandfather’s business when he was 25 years of age. There were about 23 companies at that time including Pussellawa Plantation, Mathurata Plantation, Sri Lanka Hydropower, Sri Lanka Holdings, Sri Lanka Distribution and some major export and import companies. His grandfather was also the owner of HDFC bank. Arjun Aloysius of age 32 now, was a challenging competitor to business experts in Sri Lanka. Now he owns a group of companies of about 28 firms which has promoted over 12,000 direct and indirect employment opportunities.

  • Who is Arjuna Mahendran?

He is a high qualified professional who has worked in high ranked companies all over the world. He was the Chief economist for HSBC Asia Pacific Region and one of those companies was Emirates and NDB. He is the son of Charlie Mahendran who was a well-known statesman in Sri Lanka.


  • What kind of relationship exists between Arjun Aloysius and Arjuna Mahendran?

Arjun Aloysius married the daughter of Arjuna Mahendran as a result of a love affair began at the time he was studyind abroad. There was no any problem Arjuna Mahendran who worked in Singapore and Arjun Aloysius who worked in Sri Lanka.



  • What kind of relationship exists between Arjuna Mahendran and Ranil Wickramasinghe?


They are friends since their childhood and as well as Ranil, Arjuna too is a child of a UNP member. As Arjuna was a genius in his studies, he went abroad for higher studies. Since Ranil came to power on and off, Arjuna served him as an economic consultant. Ranil encouraged his foreign investments because he was associated with high ranked business firms in the world.



  • What was the fault?

Everyone’s foremost expectation towards the government of good governance was to lead the country in development keeping all the irregularities of the previous government back. The main challenge for the new government was to encourage foreign investments from the companies who dropped correlation with Sri Lanka. Therefore the need to depose the previous head of Central bank arose due to irregularities including greek treasury bonds which caused a loss over Rs.24 000 crores to the government.    


Here, the first suggestion was the professor of a local university to be appointed as the head of the Central Bank by the Prime Minister which was later offloaded because he lacked experience. Many names were prominent including the relatives of some ministers in nominations from both government and opposition parties. All at once Ranil remembered of his friend Arjuna who had international bonds which could be bebeficial for the new government of good governance.


In spite of Arjuna Mahendran’s unwillingness at the very outset, he accepted his friend’s invitation to serve his motherland. Although he came to Sri Lanka, there was a huge obstacle for his independence as the head of the Central Bank; possession of a debtor company to his son-in law correlated with the Central bank of Sri Lanka. As a further consequence, Arjuna Mahendran became the head of the Central bank of Sri Lanka after Arjun Aloysius had resigned from the director board of that company.



  • What is a treasury bond?

It is a way of borrowing long term debts to the government. Example:


Assume that the Central Bank needs debt of Rs.1000.
If the Central Bank issues treasury bonds of Rs.100 each
for an interest of 10%,
The Central bank issues a treasury bond of Rs.100 and receives Rs.90. (at maturity)
The government has to pay the interest of Rs.10
Like this, the cost of debts for Rs.1000 is Rs.100. 
In the sense, the interest is 100/1000=10%.
If the government borrows debts of Rs.100, the cost is Rs.10.
If the government borrows debts of Rs.1 000, the cost is Rs.100.
If the government borrows debts of Rs.10 000, the cost is Rs.1 000.
If the government borrows debts of Rs.100 000, the cost is Rs.10 000.
If the government borrows debts of Rs.1 000 000, the cost is Rs.100 000.
If the government borrows debts of Rs.10 000 000, the cost is Rs.1 000 000.
If the government borrows debts of Rs.100 000 000, the cost is Rs.10 000 000.
If the government borrows debts of Rs.10 000 000 000, the cost is Rs.100 000 000.
If the government borrows debts of Rs.100 000 000 000, the cost is Rs.10 000 000 000.

There are two main ways a primary dealer profits;

01. Aforesaid interest profit
02. Profit made by selling the treasury bonds to the secondary dealers. The factors leading to the profit made by such a deal consist of the amount of debts credited to the government and the interest. Those who credit more earn more while others earn less.







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