(Adds cenbank head comments)
COLOMBO, April 8 (Reuters) - Sri Lanka sold a $500 million,five-year sovereign bond at a yield of 5.125 percent, the islandnation's central bank said on Tuesday.
It was the second eurobond the $67 billion economy sold thisyear. In January, it sold $1 billion, five-year sovereign bondat a yield of 6 percent.
The Indian Ocean island nation's 2014 budget approved a $1.5billion overseas borrowing to finance some infrastructureprojects.
The latest bond issue, the seventh by Sri Lanka since thefirst eurobond in 2007, was priced at a yield of 5.125 percentafter a 5.5 percent initial price guidance. This is the lowestyield Sri Lanka has got for a five-year paper.
"This tighter yield reflects the continued confidence thatinternational investors have placed in the sovereign bondissuance of Sri Lanka," the central bank said in a statement.
Citigroup, HSBC, and Standard Chartered Bank were the joint lead managers and bookrunners for thebond issue, which was oversubscribed by 8.3 times.
Ajith Nivard Cabraal, the central bank governor, said theentire proceeds will be absorbed by the central bank and the$500 million inflow is unlikely to have an impact on the overallexchange rate.
"It will have a positive outlook because our reserves willprobably increase beyond $8 billion," Cabraal said.
Sri Lanka's previous five-year issuances in 2007, 2009 and January 2014 were priced atyields of 8.25 percent, 7.40 percent and 6.00 percentrespectively. (Reporting by Shihar Aneez and Ranga Sirilal; Editing byAnupama Dwivedi)