Yields on medium-dated government bonds rose by as much as 35 basis points over the past week, even as short-term rates eased and daily secondary market activity stayed within a narrow range
Yields on Sri Lanka’s medium-to-long-dated government bonds moved higher over the past week, with the steepest increases concentrated in maturities between three and nine years, according to secondary market data released Tuesday.
Bonds maturing around 2029 to 2033 — often referred to as the “belly” of the yield curve — recorded the largest weekly increases, with yields climbing between 25 and 35 basis points. The five-year segment saw the sharpest move, rising 35 basis points from the prior week, while seven-year yields also rose 35 basis points over the same period.
Longer-dated bonds, maturing in 10 years and beyond, posted more modest increases, rising between 13 and 15 basis points week-on-week. At the shorter end of the curve, yields moved in the opposite direction: bonds maturing within three months, six months and one year all eased, falling between 5 and 10 basis points over the week.
Day-on-day movements were more contained. Most tenors were flat compared to the previous session, with only the one-year, three-year, five-year and seven-year segments recording modest increases of 5 to 10 basis points.
Secondary market trading during the session spanned a wide range of maturities, from bonds maturing in 2028 through to those maturing in 2034, with transactions clustered around the yield levels reflected in the day’s closing rates.
Separately, the Public Debt Management Office confirmed it will hold a new Treasury bond auction on 11 September, offering LKR 150 billion across three maturities — 2030, 2034 and 2037. The announcement adds to near-term supply expectations in the bond market.
On the currency front, the rupee held broadly steady against the US dollar, trading at 328.21 compared to 328.34 in the previous session. Liquidity in the banking system edged up slightly, with excess liquidity at LKR 363.31 billion compared to LKR 362.14 billion previously.
Key Numbers
| Metric | Value | Change |
|---|---|---|
| 5-Year bond yield | 11.00% | +35 bps (WoW) |
| 7-Year bond yield | 11.60% | +35 bps (WoW) |
| 3-Year bond yield | 10.50% | +25 bps (WoW) |
| 10-Year bond yield | 11.90% | +15 bps (WoW) |
| 1-Year T-bill yield | 9.75% | -10 bps (WoW) |
| USD/LKR | 328.21 | -0.13 vs prior session |
| Banking system excess liquidity | LKR 363.31 Bn | +LKR 1.17 Bn |
| Upcoming T-bond auction | LKR 150 Bn (11-Sep) | 2030/2034/2037 maturities |
Business Impact
The rise in medium-term bond yields signals higher borrowing costs for entities looking to raise longer-term financing, and may influence pricing on corporate debt issuances benchmarked against government securities. For businesses and investors holding fixed-income portfolios, the steepening in the belly of the curve relative to the short end reflects a market recalibrating rate expectations for the three-to-nine-year horizon specifically, rather than a broad-based shift. The upcoming LKR 150 billion bond auction will be a key test of demand at current yield levels and could influence pricing direction ahead of settlement.
Source Attribution
Source: Colombo Stock Exchange market data, Central Bank of Sri Lanka statistics and publicly available market information.