Excess liquidity rises to LKR 333.21Bn from LKR 278.51Bn as light secondary market activity and a firmer rupee mark the start of the trading week
Excess liquidity in Sri Lanka’s banking system rose to LKR 333.21Bn on August 24, up from LKR 278.51Bn previously, even as secondary market trading in government securities remained subdued.
The secondary bond market opened the week on a quiet note, with light buying interest and moderate trading volumes across maturities. Movement in yields was mixed rather than directional: the 15.09.2029 maturity eased 13 basis points week-on-week while the 15.12.2032 maturity rose 12 basis points, and the 01.07.2028 and 15.08.2036 maturities held broadly unchanged. Shorter-dated paper, including the 01.07.2028 maturity, traded around 10.15%, while the long-dated 15.08.2036 maturity was dealt within a narrow 11.97%-12.00% range.
The rise in system liquidity came alongside a firmer rupee, which strengthened to LKR 329.45 against the US dollar from LKR 330.17 previously, and a T-Bill auction at which the PDMO raised its full LKR 120Bn target with yields easing across all tenors.
Foreign holdings of Sri Lankan government securities continued their recent upward trajectory, registering a week-on-week increase of 4.27%.
Key Numbers
| Metric | Value |
|---|---|
| Excess Liquidity | LKR 333.21Bn (vs LKR 278.51Bn previously) |
| USD/LKR | 329.45 (vs 330.17 previously) |
| Foreign Holdings of GSecs (WoW) | +4.27% |
| 15.09.2029 Bond Yield (WoW) | -13bps |
| 15.12.2032 Bond Yield (WoW) | +12bps |
| 01.07.2028 Bond Yield (WoW) | Unchanged |
| 15.08.2036 Bond Yield (WoW) | Unchanged |
Business Impact
Rising system liquidity is generally supportive of credit conditions and can ease pressure on short-term funding costs for banks and, by extension, businesses seeking working capital. The continued increase in foreign holdings of government securities is a data point worth watching alongside the equity market’s ongoing foreign outflows, as it points to differing investor positioning across Sri Lankan asset classes. The quiet secondary bond market activity suggests investors are largely holding steady positions for now rather than repricing risk meaningfully in either direction.
Source Attribution
Source: Central Bank of Sri Lanka statistics and publicly available market information.