Asia's highest default risk puts spotlight on Sri Lanka debt worry

The first test comes July 27, when the South Asian nation must repay a $1 billion bond to investors.

Sri Lanka’s risk premium for a default jumped, reflecting concern that the pandemic is damaging the nation’s ability to fill its foreign-exchange coffers ahead of at least $2.5 billion in dollar debt due in the next 12 months.

The nation’s five-year credit default swaps rose to 1,553 basis points on Monday, the highest since March 1. A separate gauge of one-year default probability was at 27.9 per cent, the steepest in Asia, up from around 13 per cent over six months ago, according to a Bloomberg model where a reading above 1.5 per cent signifies high risk of failure to pay.

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