The six-year yield leads a week-long rise in the middle of the curve, while short-term yields slip and most maturities ease slightly on the day.
Sri Lanka’s medium-term government bond yields are well above where they stood a week ago, even after a modest pullback during the latest session.
The sharpest weekly move was in the bond maturing in October 2032, roughly a six-year tenor. Its yield rose 40 basis points over the week to about 11.70%. The bond maturing in May 2031 (about five years) rose 20 basis points to 11.40%, and the October 2034 bond (about eight years) rose 18 basis points to 12.00%. Yields on bonds maturing between 2028 and 2031 rose by 5 to 10 basis points, while the 2033 bond rose 15 basis points.
Short end moves the other way
The weekly increase was concentrated in the middle of the curve. Yields at the shortest end of the market slipped, with the 3-month and 1-year rates each down 5 basis points on the week, while the 6-month rate was unchanged. At the long end, yields on the August 2039 bond (about 13 years) were flat on the week at about 12.23%.
As a result, the gap between the 1-year yield and the 6-year yield widened to roughly 180 basis points from about 135 a week earlier. The yield curve is therefore steeper than it was seven days ago.
Easing on the day
Compared with the previous session, yields were lower at most maturities, mostly by 5 to 10 basis points. The 4-, 5-, 7- and 8-year points each eased by 10 basis points. The 6-month, 10-year and 13-year yields showed little or no change on the day.
Trading was moderate. The August 2030 bond changed hands at yields of 11.00% to 11.15%, the December 2032 bond at 11.60% to 11.75%, and the 2034 maturities in a range of 11.90% to 12.00%.
The day’s yield movements came alongside the Central Bank of Sri Lanka’s decision to keep the Overnight Policy Rate at 8.75%. The central bank’s decision coincided with the daily easing, but the weekly rise began before it, and the data do not establish a link between the two.
Treasury bill auction
At the weekly Treasury bill auction, the Public Debt Management Office accepted LKR 80.0 billion in the first phase, in line with the amount offered. Yields at auction rose across the board: 9.25% for 3-month bills (up 5 basis points), 9.41% for 6-month bills (up 4) and 9.95% for 12-month bills (up 2).
Business Impact
Government securities yields are the benchmark for much of the rest of the financial system, so a week of rising medium-term yields matters beyond the bond market. Banks price medium-term lending off these yields, and companies that issue debt or plan to borrow for projects over several years will be watching the 5- to 8-year range, where the weekly increases were largest.
The easing on the day is modest and does not reverse the week’s move. Businesses assessing borrowing costs should note that short-term rates are not rising, while medium-term rates are meaningfully higher than a week ago.
Key Numbers
| Maturity (approx. tenor) | Today | A week earlier | Previous session | Weekly change | Daily change |
|---|---|---|---|---|---|
| 1 year | 9.90% | 9.95% | 9.95% | -5 bps | -5 bps |
| Oct-2028 (2Y) | 10.60% | 10.55% | 10.65% | +5 bps | -5 bps |
| Sep-2029 (3Y) | 10.90% | 10.85% | 10.95% | +5 bps | -5 bps |
| Aug-2030 (4Y) | 11.15% | 11.05% | 11.25% | +10 bps | -10 bps |
| May-2031 (5Y) | 11.40% | 11.20% | 11.50% | +20 bps | -10 bps |
| Oct-2032 (6Y) | 11.70% | 11.30% | 11.75% | +40 bps | -5 bps |
| Oct-2034 (8Y) | 12.00% | 11.83% | 12.10% | +18 bps | -10 bps |
| Aug-2036 (10Y) | 12.18% | 12.05% | 12.18% | +13 bps | 0 bps |
| Aug-2039 (13Y) | 12.23% | 12.23% | 12.30% | 0 bps | -8 bps |
Source Attribution
Source: Central Bank of Sri Lanka statistics, Colombo Stock Exchange market data and publicly available market information.