Secondary Bond Market Yields Steady Amid External Volatility 📈

The Sri Lankan secondary bond market experienced choppy trading last week, driven primarily by Middle Eastern geopolitical tensions and fluctuating Brent crude prices. Despite intra-week swings, yields closed broadly unchanged across the belly and long end of the curve. • Market Drivers & Policy: Sentiment remained cautious as the Central Bank of Sri Lanka held policy rates steady. Yields faced upward pressure following the first T-Bill rate hike in 10 weeks and conflicting international diplomatic reports. • Yield Curve Performance: • Short-term: 2027 maturities traded between 8.57%–8.72%. • Medium-term: 2029 tenors saw activity between 9.65%–10.12%, while 2031 maturities hit highs of 10.37%. • Long-term: 2034/2035 bonds traded in the 10.97%–11.23% range. • Treasury Bill Auction: Rates rose across all tenures for the first time in 10 weeks. The 91-day yield rose to 7.64% (+3 bps), 182-day to 7.95% (+4 bps), and 364-day to 8.32% (+9 bps). The auction was undersubscribed, raising only Rs. 34.94 Bn (43.68% of the Rs. 80 Bn offer). • Foreign Inflows & Liquidity: Government securities saw a net foreign outflow of Rs. 8.68 Bn—the fourth consecutive weekly drop—bringing total foreign holdings down to Rs. 148.60 Bn. Market liquidity remains in a surplus of Rs. 288.31 Bn. • Currency Watch: The LKR depreciated against the US Dollar, closing the week at Rs. 314.70/315.00 compared to the previous week’s Rs. 311.85/312.00. _Data based on weekly market summary from Wealth Trust Securities._