Foreign investment in local government securities rose for a further week, continuing a steady build-up since early June even as secondary market trading activity stayed subdued.
Foreign holdings of Sri Lankan government securities have continued to build steadily, extending a trend now running for several consecutive weeks even as day-to-day secondary market trading has remained thin.
Foreign holdings rose 4.54% week-on-week to LKR 176,561 million as of mid-July. That marks a substantial increase from the roughly LKR 121,331 million recorded in early June, representing a rise of close to 46% over the period. The climb has been broadly consistent from one week to the next, rather than driven by a single large inflow, suggesting a gradual reallocation into Sri Lankan government debt rather than a one-off event.
This build in foreign holdings has occurred against a backdrop of relatively quiet secondary market conditions. Trading volumes in government securities have been described as insignificant in recent sessions, with two long-dated maturities — 15 December 2032 and 15 January 2033 — among the few that changed hands, both at 12.00%. Yields on government securities also moved higher at the long end of the curve this week, even as short-tenor rates eased slightly, a divergence that may be relevant context for the pace of foreign inflows going forward.
Total outstanding government securities stock stood at LKR 18,634.42 billion, up 0.64% week-on-week, with Treasury bonds making up the large majority of that figure against a smaller share of Treasury bills.
Overnight liquidity in the banking system was broadly stable, edging up marginally to LKR 168.13 billion. The rupee also held steady, appreciating slightly to LKR 336.23 against the US dollar.
The trend in foreign holdings comes ahead of the Central Bank of Sri Lanka’s fourth Monetary Policy Decision of 2026, due on 22 July, which markets will watch for signals on the interest rate path that could influence the relative appeal of local government debt to foreign investors.
Business Impact
A sustained rise in foreign holdings of government securities is typically read as a signal of improving external confidence in Sri Lanka’s fixed income market, and can support the currency and government financing conditions. However, the same holdings can be sensitive to shifts in global risk sentiment or local policy signals, meaning the trend bears watching around Wednesday’s rate decision rather than being read as a settled shift.
Key Numbers
| Metric | Value | Change |
|---|---|---|
| Foreign Holding of G-Secs | LKR 176,561 Mn | +4.54% WoW |
| Foreign Holding (early June) | LKR 121,331 Mn | ~+46% since early June |
| Total Outstanding G-Sec Stock | LKR 18,634.42 Bn | +0.64% WoW |
| — of which T-Bonds | LKR 16,248 Bn | — |
| — of which T-Bills | LKR 2,386 Bn | — |
| Overnight Liquidity | LKR 168.13 Bn | +LKR 0.16 Bn |
| USD/LKR | 336.23 | Appreciated from 336.31 |
Source Attribution:
Source: Central Bank of Sri Lanka statistics and publicly available market information.