Sri Lanka rupee opened slightly weaker against the US dollar on Monday as recent depreciation pressures persisted, while government bond yields remained broadly steady amid subdued market activity.
Sri Lanka rupee trades softer while government bond yields remain stable
The Sri Lanka rupee opened marginally weaker against the US dollar on Monday, while yields on government securities were largely unchanged, reflecting cautious sentiment in the domestic currency and bond markets, according to market participants.
In the spot market, the rupee was quoted at 309.30/40 to the US dollar on Monday, compared to 309.25/35 at the previous close on Friday. Dealers noted that the local currency has been under gradual depreciation pressure in recent weeks, influenced by external factors and ongoing demand for foreign exchange.
Market participants said the slight weakening was in line with recent trends, rather than a result of any abrupt shift in sentiment. Trading volumes remained moderate, with import-related dollar demand continuing to weigh on the currency, while exporter conversions and inflows provided partial support.
Despite the softer opening in the foreign exchange market, Sri Lanka’s government bond yields were broadly steady, indicating stable expectations around interest rates and inflation in the near term. Dealers said the bond market remained relatively calm, with limited movements across key maturities.
The bond maturing on June 15, 2029, was quoted at yields of 9.54/9.58 percent, largely unchanged from previous levels. Meanwhile, the bond maturing on September 15, 2029, was quoted at 9.50/9.65 percent, showing a marginal adjustment from the earlier 9.55/9.62 percent range.
The March 15, 2031 maturity was quoted flat at 9.90/10.00 percent, indicating steady demand and supply conditions at the longer end of the mid-curve. Dealers noted that investors remained comfortable holding medium-tenor securities amid expectations of stable monetary policy.
Further along the yield curve, the bond maturing on June 1, 2033, was quoted at 10.62/10.70 percent, while the longer-dated June 15, 2035 bond was quoted at 10.87/10.95 percent, slightly lower than the previous 10.90/10.93 percent range.
Market analysts said the relative stability in bond yields reflects confidence that policy rates will remain unchanged in the near term. The Central Bank of Sri Lanka has kept its key policy rates steady since May last year, following an extended easing cycle that saw rates cut significantly over a two-year period.
The stable yield environment has also been supported by continued foreign interest in rupee-denominated government securities, even as the currency faces mild depreciation. Foreign investors have been net buyers of Sri Lanka rupee bonds in several recent weeks, helping anchor yields despite global uncertainty.
Globally, emerging market currencies have been influenced by shifting expectations around US monetary policy, with investors closely monitoring signals from the Federal Reserve. Any move toward lower interest rates in advanced economies could support capital flows into higher-yielding emerging markets, including Sri Lanka.
Domestically, analysts said the rupee’s performance will continue to depend on trade flows, tourism receipts, worker remittances, and the pace of import demand. While seasonal inflows are expected to provide some support, pressures from external debt servicing and energy imports remain key factors.
In the bond market, dealers expect yields to remain range-bound in the near term, barring any unexpected policy announcements or shifts in inflation expectations. Fiscal discipline, reserve accumulation, and progress under ongoing economic reforms are likely to remain central to investor confidence.
Overall, Monday’s trading reflected a cautious but stable market tone, with a marginally weaker rupee balanced by steady bond yields, underscoring a period of consolidation in Sri Lanka’s financial markets.