The Sri Lanka rupee weaker trend returned to the currency market on Thursday as the local unit slipped further against the US dollar. Market dealers also reported a notable decline in government bond yields amid renewed investor positioning.
Sri Lanka rupee moves lower as bond yields ease amid active market signals
The currency market exhibited fresh volatility as the rupee was quoted at 308.95/309.05 to the US dollar in the spot market, a mild deterioration from the previous day’s 308.80/90 levels. Dealers indicated that renewed dollar demand and cautious sentiment surrounding upcoming financial commitments contributed to the weaker trading position. Although the movement was marginal, it added to the week’s pattern of fluctuating exchange rates and highlighted the market’s sensitivity to liquidity flows. Market analysts noted that temporary mismatches in supply and demand for foreign currency often intensify sentiment-driven shifts, especially during periods of heightened global uncertainty.
Meanwhile, bond markets continued to show strong activity with a clear downward movement in yields across several maturities. The bond maturing on 15 February 2028 saw a decline to 9.05/15 percent, compared with 9.15/20 percent the previous day. This easing was interpreted by traders as a sign of strengthening demand in the medium-term segment, reflecting improved investor confidence. The yield on the bond maturing on 15 September 2029 stabilized around 9.50/52 percent, showing sustained interest from institutional buyers looking for predictable returns in a shifting economic landscape. Analysts suggested that consistent demand for these mid-term instruments may indicate expectations of stable monetary policy direction in the coming months.
Longer-tenor securities also exhibited notable yield compression. The bond maturing on 1 July 2030 was quoted at 9.55/65 percent, continuing the trend of lowered borrowing costs for the government’s funding program. Market participants attributed this trend to strategic investor reallocations and the anticipation of policy continuity that could support a more predictable macroeconomic environment. The 15 December 2032 bond yield fell to 10.20/30 percent from 10.25/30 percent, underscoring a gradual shift toward lower long-term yields. Similarly, the bond maturing on 15 June 2035 closed at 10.63/70 percent, signaling a steady appetite for long-dated instruments that offer competitive yields amid moderating inflation expectations.
Currency conversion rates across major global currencies also reflected parallel movements. The telegraphic transfer rate for the US dollar stood at 305.2500 for buying and 312.2500 for selling. The British pound traded at 407.5153 for buying and 418.8771 for selling, while the euro posted buying and selling rates of 354.9874 and 366.3506 respectively. Market observers commented that while these levels were consistent with recent trading bands, the broader trend suggested increasing sensitivity to external economic developments and global interest rate signals. As central banks continue to reassess inflation trajectories worldwide, emerging economies like Sri Lanka remain attentive to potential currency impacts.
Equity markets, however, demonstrated resilience. The Colombo Stock Exchange sustained its upward momentum, with the ASPI climbing 0.78 percent, or 174.24 points, to close at 22,596. This marked another day of gains driven by investor confidence and sectoral rallies supported by improving corporate earnings expectations. The S&P SL20 also advanced by 0.57 percent, or 34.51 points, to end the session at 6,118. Analysts attributed the continued rise to strong turnover levels and increased participation from both domestic and foreign investors, who appear encouraged by relative market stability and emerging opportunities in undervalued counters.
In parallel, a Treasury bond auction amounting to Rs 143,000 million was ongoing, drawing attention from institutional investors and market watchers who anticipated further insights into government borrowing strategies. The auction outcome is expected to influence near-term yield movements and shape investor sentiment heading into the next cycle of public debt issuance. With the Sri Lanka rupee weaker and bond yields trending downward, market participants remain vigilant for signals that could clarify the trajectory of interest rates, liquidity conditions, and investor appetite in the weeks ahead.