Government to raise LKR 50 billion through a fresh bond auction spanning a 2030 maturity at 10.00% and a 2035 maturity at 11.50%, as authorities continue tapping the domestic debt market.
The government has announced a new Treasury bond auction covering two maturities, seeking to raise a combined LKR 50 billion from the domestic debt market as part of its ongoing financing programme.
The auction will offer LKR 30 billion of a bond carrying a 10.00% coupon maturing in 2030, alongside LKR 20 billion of a bond carrying an 11.50% coupon maturing in 2035. The announcement follows a separate two-phase Treasury bond auction conducted on July 30, the results of which remain pending final confirmation for the second phase.
The new issuance comes against a backdrop of falling yields across the government securities curve. At the most recent weekly Treasury bill auction, yields fell across all three tenors on offer, with the 91-day bill declining 22 basis points to 9.22%. Longer-dated bond yields have also eased, with the 10-year segment down 25 basis points and the 13-year segment down 23 basis points over the past week, reflecting strong demand for government paper.
Banking system liquidity has continued to expand, reaching LKR 300.25 billion, up from LKR 288.98 billion in the prior session, a factor that has generally supported demand at recent auctions. Foreign holdings of Sri Lankan government securities have also been on a steady upward trend since early July, rising 0.70% over the past week to LKR 194.21 billion, pointing to continued external investor interest in local currency debt.
In the secondary market, bonds in the 2030 maturity segment saw some profit-taking activity, trading between 10.75% and 10.90%, providing a reference point ahead of the new issuance in the same maturity bracket. Bonds maturing in 2035 and surrounding tenors have generally traded in the 11.85% to 12.10% range in recent sessions.
Business Impact
A well-subscribed auction across the 2030 and 2035 maturities would reinforce the government’s ability to fund its borrowing programme at increasingly favourable rates, supporting the broader trend of declining yields that could eventually flow through to lending rates for businesses. The choice of a 2030 short-to-medium tenor alongside a longer 2035 maturity suggests an effort to manage the debt maturity profile across different points on the curve. Strong foreign participation, if it materializes, would further signal confidence in Sri Lanka’s fiscal trajectory, a relevant consideration for businesses assessing the broader economic and currency outlook.
What to Watch Next
Results of the new bond auction, along with confirmation of the pending Phase Two results from the July 30 auction, will be closely watched for signals on investor demand and clearing yields. Any divergence between the offered amounts and total bids received would provide further insight into current appetite for government debt at prevailing rate levels.
Key Numbers
| Metric | Value |
|---|---|
| 2030 ‘A’ Bond (10.00%) Offered | LKR 30 Bn |
| 2035 ‘A’ Bond (11.50%) Offered | LKR 20 Bn |
| Total New Auction Size | LKR 50 Bn |
| Prior T-Bond Auction Date | July 30, 2026 |
| Banking System Liquidity | LKR 300.25 Bn |
| Foreign Holdings of Govt. Securities | LKR 194.21 Bn (+0.70% WoW) |
| 10-Year Yield (Secondary Market) | 12.05% (-25 bps WoW) |
Source Attribution
Source: Central Bank of Sri Lanka statistics and publicly available market information.