📈 Volatile Week Ends with Rupee Recovery and Rising Bond Yields

Sri Lanka’s secondary bond market ended on a positive note after a predominantly bearish week driven by global crude oil volatility and Middle East tensions, which prompted a defensive stance mirroring rising global yields. • Market Sentiment & Bonds: Yields rose for four consecutive sessions due to selling pressure but partially retraced on Friday due to a late buying surge and a sharp appreciation of the Sri Lankan rupee. Yield curves moved in an inverted U-pattern, closing the week notably higher. • Maturity Movements: The 01.08.26 maturity traded between 8.25% and 8.68%. In the 2028 space, the 01.07.28 maturity peaked at 10.55% before recovering to 10.25%. Long-term 2034 and 2035 maturities traded up to highs of 11.70% and 11.50% respectively. • T-Bill Auction: The weekly T-bill auction was undersubscribed, raising only 48.03% (Rs. 67.24 Bn) of the Rs. 140 Bn on offer. Yields reversed their downward trend; the 91-day tenor rose by 5 bps to 8.18%, the 182-day tenor rose by 2 bps to 8.25%, while the 364-day tenor held steady at 8.49%. • Foreign Outflows: Government securities recorded a net foreign outflow for the third consecutive week, shedding Rs. 4.58 Bn. Total foreign holdings dropped to Rs. 133.43 Bn as of May 21. • Liquidity & Forex: Outstanding market liquidity surplus fell to Rs. 141.27 Bn (from Rs. 156.80 Bn). In the forex market, the USD/LKR spot contract exhibited high volatility, trading between Rs. 326.50 and Rs. 348.00 before recovering strongly to close at Rs. 329.00. Average daily trading volume stood at US$ 50.13 Mn.