Phase 2 results from the June 26 Treasury Bond auction are now confirmed, while short-tenor secondary market yields have risen up to 17 basis points week-on-week, diverging from continued declines at the medium and longer end of the curve.
The Public Debt Management Office has confirmed Phase 2 results for the Treasury Bond auction held on June 26, 2026, with the 11.00%/2030 ‘B’ tenor settling at a weighted average yield of 11.44% and the 11.50%/2035 ‘A’ tenor closing at 11.88%. Total bids received in Phase 2 reached LKR 31,227 million.
The Phase 1 weighted average yield for the 2030 tenor had settled at 11.44%, making the Phase 2 outcome consistent with Phase 1 pricing at that tenor. The 2035 tenor recorded a Phase 2 weighted average of 11.88%, reflecting investor demand for a premium at the longer end of the offered maturities.
The confirmed auction results provide a fresh set of reference yields for the secondary bond market at two actively traded points on the curve. The 2030 and 2035 maturities have been among the most frequently traded segments in recent sessions, and the auction outcomes serve as pricing anchors for participants in the secondary market.
Against the backdrop of these auction results, a divergence has emerged between short-end and longer-dated yields in the secondary market on a week-on-week basis. The 6-month T-Bill secondary yield rose 17 basis points to 10.25% compared to the prior week, while the 3-month and 1-year tenors each rose 10 to 12 basis points to 10.15% and 10.28% respectively. The most recent T-Bill auction conducted on July 1 and 2 recorded weighted average yields of 10.23% at the 91-day tenor and 10.30% at the 184-day tenor, each rising 9 basis points from prior auction results, with total bids of LKR 156,391 million against an offer of LKR 100,000 million.
At the medium and longer end of the curve, the direction was the opposite. The 5-year tenor declined 15 basis points week-on-week to 11.35%, while the 4-year, 6-year, 7-year, 8-year, 9-year, 10-year, 11-year and 13-year tenors each fell between 5 and 15 basis points. The 2-year and 3-year tenors held unchanged at 10.70% and 10.85% respectively.
Secondary market trading on July 6 was confined to a small number of maturities at the mid end of the curve. The 01.08.2030 bond traded at 11.25%, the 15.01.2033 changed hands at 11.60% and the 01.11.2033 settled at 11.66%. In the 2035 segment, the 15.03.2035 bond traded at 11.70% and the 15.06.2035 changed hands at 11.75%. Overall volumes remained thin and the yield curve was broadly unchanged on the day.
Foreign holdings of government securities rose 0.74% week-on-week, a notable development given the sustained foreign selling pressure in the equity market over the same period. Total outstanding government securities increased 0.36% week-on-week to LKR 18,507.41 million, comprising LKR 16,136 million in Treasury Bonds and LKR 2,372 million in Treasury Bills.
Banking system excess liquidity expanded to LKR 132.29 billion from LKR 128.47 billion in the prior session, the highest level recorded in recent weeks, providing an accommodative backdrop for fixed income market activity even as short-end yields edge higher at auction.
Key Numbers:
| Metric | Value |
|---|---|
| T-Bond Auction Date | June 26, 2026 |
| 11.00%/2030 ‘B’ Phase 1 W.Avg | 11.44% |
| 11.00%/2030 ‘B’ Phase 2 W.Avg | 11.44% |
| 11.50%/2035 ‘A’ Phase 2 W.Avg | 11.88% |
| Phase 2 Total Bids | LKR 31,227 Million |
| T-Bill Auction 91-Day Yield | 10.23% (+9 bps) |
| T-Bill Auction 184-Day Yield | 10.30% (+9 bps) |
| T-Bill Total Bids | LKR 156,391 Million |
| 6M Secondary Yield WoW Change | +17 bps |
| 5Y Secondary Yield WoW Change | -15 bps |
| 10Y Secondary Yield | 11.90% (-5 bps WoW) |
| Foreign Holdings WoW Change | +0.74% |
| Total GSEC Outstanding | LKR 18,507.41 Million |
| Banking System Liquidity | LKR 132.29 Billion |
Business Impact:
The confirmation of T-Bond Phase 2 yields provides clarity on the government’s cost of medium and long-term borrowing from the June 26 auction. The 11.88% weighted average on the 2035 tenor sets a reference point that fixed income fund managers and institutional investors will use to price secondary market transactions in the weeks ahead. The divergence between rising short-end yields and falling longer-dated yields is the more significant development for businesses to track. If short-end rates continue to rise at auction while longer-dated yields decline, the yield curve is effectively steepening, which has implications for the relative cost of short-term versus long-term borrowing. Businesses with short-duration debt facilities benchmarked to T-Bill rates may face marginally higher refinancing costs, while those looking at longer-term fixed-rate instruments may find conditions more favorable. The rise in foreign holdings of government securities alongside sustained foreign equity selling suggests that international investors are selectively repositioning toward fixed income rather than exiting Sri Lankan assets entirely, which is a moderately positive signal for the government’s ability to place paper in the market going forward.
Source Attribution:
Source: Central Bank of Sri Lanka statistics and publicly available fixed income market information.