Secondary market yields on medium-term maturities rose over the week as investors positioned for a LKR 150 billion Treasury bond sale
Yields on Sri Lanka’s government securities rose across medium-term maturities over the past week, with the secondary market turning cautious ahead of a Treasury bond auction offering LKR 150 billion.
Bid yields on the 3-year tenor climbed 20 basis points week-on-week, the largest move on the curve, while the 5-year and 7-year tenors each rose 15 basis points. The 6-year tenor added 10 basis points, and yields further out on the curve, from 8 years to 13 years, were broadly steady to marginally higher. At the shorter end, Treasury bill yields from this week’s auction eased slightly: the 184-day and 364-day rates fell 3 and 4 basis points respectively, while the 91-day rate rose 7 basis points to 9.03%.
Secondary market trading itself remained thin, with participants staying largely on the sidelines ahead of Thursday’s auction. Among longer maturities that did change hands, the bond maturing 15.10.2030 traded at 10.75%, while the 15.10.2034 maturity traded at 11.85%.
The Treasury bond auction scheduled for Thursday will offer three re-issued maturities: LKR 70 billion of the 10.00% 2030’A’ bond, LKR 50 billion of the 11.70% 2034’A’ bond, and LKR 30 billion of the 10.75% 2037’A’ bond. Banking system liquidity expanded to LKR 366.20 billion from LKR 363.14 billion, providing a somewhat larger cushion of funds heading into the auction.
Business Impact
Firmer medium-term yields point to higher near-term borrowing costs for the government and could influence pricing on corporate and bank lending benchmarks tied to the government yield curve if the move is sustained. Corporate treasurers and institutional investors will be watching Thursday’s auction results closely for signals on whether this week’s upward yield drift reflects a durable shift in investor demand or a temporary, auction-related repositioning. A weaker-than-expected auction outcome, such as under-subscription or yields settling above recent secondary market levels, would reinforce the cautious tone already evident in this week’s trading.
Key Numbers
| Tenure | Bid Yield | WoW Change |
|---|---|---|
| 91 Days (T-Bill) | 9.03% | +7 bps |
| 184 Days (T-Bill) | 9.24% | -3 bps |
| 364 Days (T-Bill) | 9.77% | -4 bps |
| 3-Year | 10.50% | +20 bps |
| 5-Year | 10.95% | +15 bps |
| 6-Year | 11.20% | +10 bps |
| 7-Year | 11.60% | +15 bps |
| Banking System Liquidity | LKR 366.20Bn | +LKR 3.06Bn |
Upcoming Auction (11-Sep-26): LKR 150Bn — 10.00% 2030’A’ (LKR 70Bn), 11.70% 2034’A’ (LKR 50Bn), 10.75% 2037’A’ (LKR 30Bn)
Source Attribution
Source: Central Bank of Sri Lanka statistics and publicly available market information.