Overnight liquidity in the banking system expanded by close to LKR 13 billion in a single session, pointing to ample short-term funding conditions
Overnight liquidity in Sri Lanka’s banking system expanded to LKR 175.20 billion on Tuesday, up from LKR 162.36 billion in the previous session, marking a notable one-day increase of close to LKR 13 billion in surplus funds available to banks.
The rise came on the same day the Central Bank of Sri Lanka (CBSL) held its Overnight Policy Rate unchanged at 8.75 percent, with the central bank noting that the effects of tightening measures introduced in May were still transmitting through the economy. Excess liquidity has held broadly in a stable range over the past two weeks, with CBSL holdings of government securities also little changed over the same period, suggesting the current liquidity surplus reflects steady-state conditions rather than a one-off shift.
Money market conditions were reflected in short-tenor Treasury bill yields, which eased slightly at Tuesday’s PDMO auction. The 3-month bill’s weighted average yield fell 18 basis points to 9.95 percent, while the 6-month bill eased 3 basis points to 10.24 percent, consistent with ample short-term liquidity supporting demand for short-dated government paper.
Secondary market government bond yields, by contrast, held broadly steady on the day, with trading activity concentrated at the short end of the curve and overall investor participation described as subdued.
Key Numbers
| Metric | Value |
|---|---|
| Overnight Liquidity (Today) | LKR 175.20 Bn |
| Overnight Liquidity (Previous) | LKR 162.36 Bn |
| One-Day Change | +LKR 12.84 Bn (~+7.9%) |
| OPR | 8.75% (unchanged) |
| 3M T-Bill Yield | 9.95% (-18 bps) |
| 6M T-Bill Yield | 10.24% (-3 bps) |
Business Impact
A widening liquidity surplus in the banking system generally supports the availability of credit and can help keep short-term funding costs contained for banks, which may filter through to lending conditions for businesses over time. For corporates and SMEs reliant on short-term bank facilities or money market instruments, sustained excess liquidity is a broadly favourable backdrop, though the easing in short-tenor T-bill yields suggests returns on short-duration deposits or investments may soften slightly. The steady liquidity conditions alongside an unchanged policy rate point to a period of relative stability in money markets, with no immediate signal of tightening or easing bias from the central bank.
Source: Central Bank of Sri Lanka statistics and publicly available market information.