Strong investor demand saw bids nearly double the offered amount, though weighted average yields rose across all three tenors, signaling that investors priced in higher returns to deploy capital.
Sri Lanka’s Public Debt Management Office raised the full offered amount of LKR 70.0 billion at the Treasury Bill auction held on June 24, 2026, as total bids from market participants reached LKR 130.5 billion, representing a bid-to-cover ratio of approximately 1.86 times.
The strong subscription level indicates continued appetite among primary dealers and banking sector participants for short-term government paper, even as yields moved higher across all three tenors compared to the previous auction.
The 91-day bill was fully accepted at LKR 35.0 billion, with the weighted average yield rising 12 basis points to 10.14%. The 184-day bill settled at a weighted average yield of 10.21%, up 5 basis points, with LKR 25.0 billion accepted. The 364-day bill recorded a marginal increase of 1 basis point to 10.17%, with LKR 10.0 billion raised at that tenor.
The rise in T-Bill yields at this auction marks a partial reversal from the declining trend recorded at the previous auction on June 17, where the 91-day and 184-day yields had fallen by 7 basis points and 11 basis points respectively. The 12 basis point jump in the 91-day yield is particularly notable as it represents the sharpest single-auction move at that tenor in recent weeks.
The divergence between auction yields and the secondary bond market adds a layer of complexity to the current rate environment. While T-Bill yields rose at auction, secondary market bond yields in the 2-year to 4-year segment continued to drift lower on a week-on-week basis, with the 2-year and 3-year tenors each declining 10 basis points to 10.70% and 10.85% respectively. This divergence suggests that short-end auction pricing and longer-dated secondary market sentiment are currently moving in different directions.
In the secondary bond market on the same day, trading was concentrated in the mid-to-belly segment of the yield curve. The 01.05.2028 and 15.10.2028 maturities traded at 10.60% and 10.65% respectively, while the 15.12.2029 bond changed hands at 10.90%. Over the 2030 segment, the 01.08.2030 maturity traded between 11.19% and 11.14%, and the 15.10.2030 bond traded between 11.23% and 11.15%. Further out the curve, the 15.06.2034 maturity traded in the range of 11.67% to 11.65%, while the 15.03.2035 bond was dealt at 11.80%.
Banking system excess liquidity contracted modestly to LKR 61.04 billion from LKR 64.26 billion recorded in the prior session. While still elevated, the contraction partially reverses the significant expansion seen on June 23 and may reflect liquidity absorbed through auction settlement activity.
A Treasury Bond auction is scheduled for June 26, with Phase 2 results pending. The upcoming week also carries a substantial maturity wall, with LKR 56,545 million in T-Bills and LKR 51,485 million in bond interest payments falling due in the week ending July 3.
Key Numbers:
| Metric | Value |
|---|---|
| Total Amount Offered | LKR 70.0 Billion |
| Total Bids Received | LKR 130.5 Billion |
| Bid-to-Cover Ratio | ~1.86x |
| 91-Day Yield | 10.14% (+12 bps) |
| 184-Day Yield | 10.21% (+5 bps) |
| 364-Day Yield | 10.17% (+1 bp) |
| 91-Day Amount Accepted | LKR 35.0 Billion |
| 184-Day Amount Accepted | LKR 25.0 Billion |
| 364-Day Amount Accepted | LKR 10.0 Billion |
| Banking System Liquidity | LKR 61.04 Billion |
| USD/LKR | 334.77 |
Business Impact:
The full subscription of the LKR 70.0 billion auction reduces near-term pressure on the government’s domestic borrowing program and signals that the market has sufficient appetite to absorb short-term paper at current yield levels. For businesses monitoring the cost of short-term financing, the rise in T-Bill yields — particularly the 12 basis point jump in the 91-day tenor — is a signal worth watching. T-Bill rates serve as a benchmark for a range of short-term lending products, and sustained upward pressure at the short end could translate into marginally higher borrowing costs for working capital facilities. The large maturity wall in the week ending July 3, totaling over LKR 108 billion across T-Bills and bond interest, will be the next significant test of market liquidity and demand.
Source Attribution:
Source: Central Bank of Sri Lanka statistics, Public Debt Management Office auction data and publicly available fixed income market information.