📈 Secondary Bond Yields Rally on Bullish Auction & Low Inflation

The Sri Lankan secondary bond market saw a decisive shift last week as yields across the curve compressed, driven by record-high liquidity and cooler-than-expected inflation data. • Market Sentiment & Liquidity Market direction turned bullish mid-week following successful primary auctions. System liquidity hit a 22-year high, reaching a surplus of Rs. 358.76 Bn by week-end, up from Rs. 280.75 Bn previously. • Primary Auction Highlights • Treasury Bills: Yields declined for the 6th consecutive week; 91-day at 7.63%, 182-day at 7.92%, and 364-day at 8.24%. • Treasury Bonds: The PDMO raised the full Rs. 140 Bn offered. The 2030 maturity saw a weighted average yield of 9.50%, while the 2034 maturity settled at 10.70%. • Secondary Market Yield Movements • Short Tenors: 2026 maturities traded between 8.10%–8.00%; Jan 2027 eased to 8.20%. • Medium Tenors: 2028 bonds moved between 8.98%–9.19%; 2029 maturities averaged 9.40%. • Long Tenors: 2034 yields dropped from 10.80% to 10.62%; 2035 yields touched 10.70%. • Macro Indicators • Inflation: Feb CCPI slowed to +1.60% YoY (vs +2.3% in Jan), significantly below the Central Bank’s 5% target and market forecasts. • Currency: The USD/LKR spot rate appreciated slightly, closing at Rs. 309.29/309.32. • Foreign Holdings: Remained static at Rs. 163.41 Bn after four weeks of inflows. _Data based on Wealth Trust Securities and CBSL provisional reports._