Secondary Bond Market Yields Lower Amid High Auction Liquidity 📈

The Sri Lankan secondary bond market yields closed lower week-on-week, driven by robust buying interest in mid-to-long term maturities. While the short end saw intermittent profit-taking, the "belly of the curve" (2029–2030) remained stable or dropped, supported by healthy transaction volumes and block trades. • Overall Market Dynamics: Yields on 2029–2032 tenors generally eased. The 15.06.29 maturity dropped to 9.50% from week highs, while the 01.10.32 maturity traded down to 10.30%. The short end (2026) showed late-week recovery with the 15.12.26 maturity trading at 8.50%. • Treasury Auctions: - T-Bills: Last Wednesday’s auction was fully subscribed for the first time in 4 weeks, raising Rs. 100 Bn. Weighted averages rose for the 3rd consecutive week: 91-day (7.88%), 182-day (8.44%), and 364-day (8.47%). - Upcoming T-Bonds: A major auction is scheduled for today (12 Jan) offering Rs. 205 Bn across four maturities (2030, 2033, 2035, and 2039). • Liquidity & Forex: - Money Market: Net liquidity surplus rose to Rs. 171.03 Bn (up from Rs. 134.48 Bn). CBSL holdings of government securities remained flat at Rs. 2,508.92 Bn. - External Sector: Marginal net foreign inflow of Rs. 57 Mn into government securities. The Sri Lankan Rupee (LKR) appreciated slightly against the USD, closing at Rs. 309.00/30. • Sector Impact: The stable yields in the longer end reflect sustained investor confidence in government securities, providing a benchmark for corporate lending and supporting the broader financial services sector and infrastructure financing.