📈 Sri Lankan Secondary Bond Market Ends Week on Bullish Note

Sri Lanka's secondary bond market wrapped up the week firmly lower on risk-on enthusiasm. Despite early-week volatility from Middle East tensions and heavy primary auctions, potential US-Iran peace talks dropped Brent crude to ~$86/bbl on Friday, triggering a sharp broad-based rally. • Secondary Bond Market Yield Dynamics: • 2027/2028 space: The 15.09.27 maturity hit an intraweek high of 11.00% before dropping to a low of 10.75%. The 15.02.28 maturity slid from 11.75% to 11.40%. • 2029/2030 space: The 15.09.29 maturity dropped sharply from 12.50% to 11.80%. Meanwhile, the 15.05.30 maturity recovered from 12.50% to trade down at 11.92%. • Long-end maturities: The 15.03.35 maturity declined from an intraweek high of 13.25% down to a low of 12.88%. • Primary Auctions & Macro Inflows: • T-Bill Auction: Yields rose for a 4th consecutive week to their highest since Sept 2024 (91-day at 10.09%, 182-day at 10.27%, 364-day at 10.16%). The auction raised only 51.25% (Rs. 71.7 Bn) of its Rs. 140 Bn target. • T-Bond Auction: Yields came in below market expectations despite mixed results; it raised 61.70% (Rs. 92.55 Bn) of the Rs. 150 Bn offered, rejecting all bids for the longest 2037 tenor. • Foreign Holdings: Reversing a 5-week streak of outflows, rupee-denominated government securities saw a marginal net inflow of Rs. 13 million, bringing total foreign holdings to Rs. 121.34 Bn. • Liquidity and Forex: • Market liquidity surplus dropped to Rs. 62.57 Bn (down from Rs. 115.04 Bn). • The USD/LKR spot contract closed stronger at Rs. 335.50/336.00 against the previous week's Rs. 335.75/336.25, aided mid-week by shortened exporter FX conversion timelines. Average daily traded volume stood at $ 58.88 million.