📈 Sri Lanka Bond Yields Resilient Amid Global Headwinds

The secondary bond market showed resilience last week as strong domestic fiscal data countered global uncertainties like the Middle East conflict and high crude oil prices. • Fiscal Performance & Auction Results: - Revenue & grants rose 35.5% YoY to Rs. 1.03 Tn in Jan-Feb 2026. - Primary surplus expanded 66.1% YoY to Rs. 545.42 Bn; budget balance flipped to a surplus of Rs. 169.71 Bn. - Treasury Bond auction raised Rs. 176.62 Bn against a Rs. 250 Bn offer. Weighted yields came in line with/below market expectations (e.g., 2030 maturity at 10.16%, 2034 at 11.24%). - An additional Rs. 13 Bn was raised via the Direct Issuance Window. • Treasury Bills & Interest Rates: - Treasury Bill auction was fully subscribed, raising Rs. 80 Bn. - Bill yields declined across the board for the first time in 10 weeks: 91-day down 7 bps to 8.13%, 182-day down 1 bp to 8.23%, and 364-day down 3 bps to 8.49%. • Liquidity & Foreign Holdings: - Net foreign outflow of Rs. 4.73 Bn recorded, dropping total foreign holdings to Rs. 138 Bn. - Market liquidity surplus fell to Rs. 156.80 Bn (from Rs. 253.66 Bn). Weighted average Call Money and Repo rates closed at 7.79% and 7.85%. • Forex Market: - The USD/LKR spot contracts traded between Rs. 321.90 and Rs. 326.00. - Daily average traded volume stood at US$ 66.15 Mn for the first four days.