📈 Secondary Bond Market Rallies on Peace Deal Optimism & Fiscal Surplus

Sri Lanka's secondary bond market began the week with strong bullish momentum, driven by easing external pressures and excellent domestic fiscal performance. Market Drivers • Global Easing: Optimism followed a US-Iran peace agreement to end the Middle East conflict and reopen the Strait of Hormuz, triggering a sharp decline in Brent crude oil prices and lowering inflation worries. • Fiscal Surplus: The Ministry of Finance reported a budget surplus of Rs. 105 Bn for Jan-Apr 2026, a massive turnaround from the Rs. 261.6 Bn deficit in the same period of 2025. Yield Curve Declines • Aggressive buying interest drove yields down sharply across maturities: • 2028 Tenors: 15.02.28 down to 10.95%-10.90%; 01.07.28 within 11.00%-10.90%. • 2030 Tenors: Rallied strongly; 15.05.30 dropped to 11.65%-11.40%, and 01.08.30 fell to 11.75%-11.40%. • Long-Term Tenors: 15.01.33 fell to 12.00%-11.65%; 15.03.35 traded down to 12.25%-12.00%. Liquidity & Forex • Money Market: Net liquidity surplus stood at Rs. 39.36 Bn. Overnight call money and repo weighted average rates settled at 9.20% and 9.24% respectively. • Forex: The Sri Lankan Rupee strengthened, with the USD/LKR spot contract closing at Rs. 333.00/334.50 compared to the previous close of Rs. 335.50/336.00. Total traded volume was US$ 50.70 Mn.