Week-on-week yield declines of up to 15 basis points were recorded across short and mid-tenor bonds on June 25, while selling pressure emerged at the shorter end of the curve ahead of the scheduled June 26 Treasury Bond auction.
Sri Lanka’s secondary bond market recorded further yield declines across multiple tenors on June 25, 2026, extending the downward trend that has characterized the fixed income market over the past two weeks, even as shorter-end bonds faced mild selling pressure ahead of the Treasury Bond auction scheduled for June 26.
Week-on-week yield comparisons show the 2-year, 3-year and 4-year tenors each declining 15 basis points, settling at 10.70%, 10.85% and 11.20% respectively. The 5-year tenor eased 5 basis points to 11.35%, while the 8-year, 9-year and 10-year maturities each declined 5 basis points to 11.70%, 11.85% and 11.95% respectively. The 11-year tenor recorded a larger decline of 13 basis points, settling at 12.00%. The 13-year maturity held unchanged at 12.13%.
The short end of the curve, however, showed no week-on-week change across the 91-day, 182-day and 364-day tenors, each holding at 10.05%, 10.08% and 10.15% respectively in the secondary market. This stability at the short end contrasts with the rise in T-Bill auction yields recorded on June 24, where the 91-day weighted average yield rose 12 basis points to 10.14%, reflecting a divergence between auction pricing and secondary market levels.
In terms of specific maturities traded during the session, the 15.03.2028 bond changed hands at 10.60%, unchanged from recent levels. The 15.11.2029 maturity traded at 10.95%, while the 01.08.2030 bond was seen at 11.22%. At the longer end of the curve, the 15.03.2035 maturity traded at 11.85%, while the 15.08.2036 bond changed hands within a range of 12.01% to 11.98%, recording a week-on-week increase of 5 basis points — one of the few tenors to move higher during the session.
Trading activity was concentrated among primary dealers and banking sector participants, consistent with the pattern observed across recent sessions. Buying interest was noted in the long-tenor segment of the curve, while the shorter end witnessed some selling pressure that market participants attributed to positioning ahead of the June 26 Treasury Bond auction. Pre-auction selling at the short end is a common pattern as market participants adjust holdings before new supply enters the market.
The June 26 Treasury Bond auction carries offered amounts of LKR 45,000 million for the 11.00%/2030 ‘B’ tenor and LKR 15,000 million for the 11.50%/2035 ‘A’ tenor. Phase 2 results remain pending at the time of publication.
Foreign holdings of government securities remained unchanged on a week-on-week basis, indicating that the sustained foreign equity outflow trend has not extended into the government bond market.
Banking system excess liquidity expanded to LKR 65.36 billion from LKR 61.04 billion in the prior session, providing a supportive backdrop for bond market activity. Higher system liquidity generally reduces pressure on short-term rates and supports demand for fixed income instruments across the curve.
The upcoming week ending July 3 carries a combined maturity of over LKR 110 billion, comprising LKR 56,545 million in T-Bills and LKR 53,485 million in bond interest payments. How the market absorbs this maturity wall alongside the June 26 auction results will be a key indicator of near-term fixed income conditions.
Key Numbers:
| Tenor | June 25 Yield | June 18 Yield | Weekly Change |
|---|---|---|---|
| 2-Year | 10.70% | 10.85% | -15 bps |
| 3-Year | 10.85% | 11.00% | -15 bps |
| 4-Year | 11.20% | 11.35% | -15 bps |
| 5-Year | 11.35% | 11.40% | -5 bps |
| 8-Year | 11.70% | 11.75% | -5 bps |
| 9-Year | 11.85% | 11.90% | -5 bps |
| 10-Year | 11.95% | 12.00% | -5 bps |
| 11-Year | 12.00% | 12.13% | -13 bps |
| 13-Year | 12.13% | 12.13% | 0 bps |
| 15.08.2036 | 12.01%-11.98% | — | +5 bps |
| Excess Liquidity | LKR 65.36 Bn | LKR 61.04 Bn | +LKR 4.32 Bn |
| USD/LKR | 336.57 | — | +1.80 |
T-Bond Auction (June 26) — What to Watch:
| Tenor | Offered Amount |
|---|---|
| 11.00%/2030 ‘B’ | LKR 45,000 Mn |
| 11.50%/2035 ‘A’ | LKR 15,000 Mn |
| Total Offered | LKR 60,000 Mn |
Business Impact:
The continued decline in secondary bond yields across the 2-year to 11-year segment represents a meaningful shift in the cost of longer-term government borrowing over recent weeks. For corporate treasurers and CFOs, the yield curve trajectory signals that the fixed income market is pricing in an environment of gradually easing rates, which has implications for the cost of long-term debt financing. Fixed income fund managers holding existing bond positions benefit from capital appreciation as prices rise with falling yields. The June 26 Treasury Bond auction is the next critical data point — a strong bid-to-cover ratio and yields at or below secondary market levels would confirm sustained demand for government paper and support the current downward yield trend. A weak auction outcome, by contrast, could introduce upward pressure at the tenors being offered. Businesses planning long-term borrowing or refinancing should monitor the auction results closely.
Source Attribution:
Source: Central Bank of Sri Lanka statistics and publicly available fixed income market information.