Accepted yields rise 11 to 15 basis points across the 91-day, 184-day and 364-day tenors, extending the recent upward trend in short-term government borrowing costs
Yields at Sri Lanka’s latest Treasury bill auction rose across all three tenors offered, continuing a gradual upward drift in short-term government borrowing costs. The auction, settled this week, saw accepted rates increase by 11 to 15 basis points compared to the previous auction.
The 91-day bill was accepted at 9.18%, up 15 basis points from the prior auction. The 184-day tenor rose 12 basis points to 9.36%, while the 364-day bill increased 11 basis points to 9.88%. All three moves, while individually below the more significant single-day thresholds tracked for standalone breaking coverage, form part of a consistent pattern of rising short-term rates also visible in this week’s secondary bond market activity.
Demand at the auction remained firm despite the higher rates on offer. For the 91-day tenor, total bids received reached LKR 171.6 billion against an offered amount of LKR 70 billion, with the full LKR 70 billion accepted. A second phase of bidding was also conducted for the 91-day tenor, with LKR 10 billion offered and accepted.
The move in Treasury bill yields tracks alongside a broader repricing seen in the secondary government bond market this week, where yields in the belly of the curve rose by as much as 50 to 70 basis points. Taken together, the two markets point to a consistent shift toward higher short-term and medium-term government borrowing costs, rather than an isolated auction-specific move.
Banking system liquidity, a key input into short-term rate dynamics, contracted to LKR 317.84 billion from LKR 336.44 billion previously, extending a decline visible over the past week and a half following a relatively stable period through early September.
Business Impact
Rising Treasury bill yields typically influence short-term lending and deposit rates across the banking system, affecting working capital costs for businesses and returns for money market fund investors. SMEs and corporates relying on short-term credit facilities should be alert to a firming rate environment. Money market and treasury fund investors may see a corresponding uptick in yields, though this should be weighed against the broader liquidity backdrop.
What to Watch Next
Attention will turn to whether yields continue climbing at the next scheduled Treasury bill auction, and whether banking system liquidity stabilises or tightens further. Continued alignment between short-term auction yields and secondary bond market moves would reinforce the case that this is a broader, sustained rate shift rather than a temporary fluctuation.
Key Numbers
| Tenor | Accepted Yield | Change vs. Prior Auction |
|---|---|---|
| 91-Day | 9.18% | +15 bps |
| 184-Day | 9.36% | +12 bps |
| 364-Day | 9.88% | +11 bps |
| 91-Day Bids Received | LKR 171.6 Bn | vs. LKR 70 Bn offered |
| Banking System Liquidity | LKR 317.84 Bn | from LKR 336.44 Bn |
Source Attribution
Source: Central Bank of Sri Lanka statistics and publicly available market information.