Yields across the 2-year to 10-year maturities declined sharply week-on-week, signaling improved appetite for government securities in the secondary market.
Sri Lanka’s secondary bond market recorded a notable decline in yields across multiple maturities between June 16 and June 23, 2026, with the 3-year tenor posting the largest weekly drop of 30 basis points.
The 2-year bond yield fell to 10.70% from 10.98% the previous week, a decline of 28 basis points. The 3-year yield moved lower to 10.80% from 11.10%, while the 4-year and 5-year maturities each shed 25 basis points, settling at 11.20% and 11.35% respectively.
Longer-dated bonds also moved lower. The 10-year bond yield declined to 11.90% from 12.15%, while the 13-year tenor eased to 12.10% from 12.33%, a drop of 23 basis points.
Trading activity during the session was concentrated in the mid-to-belly segment of the curve. The 01.05.2028 and 15.10.2028 maturities traded between 10.60% and 10.65%, while the 15.05.2030 and 01.08.2030 tenors changed hands within the 11.10% to 11.20% range. The 01.11.2033 maturity traded between 11.70% and 11.64%, and the 15.06.2034 bond was seen at 11.70%.
At the short end, the most recent Treasury Bill auction conducted on June 17 recorded a weighted average yield of 10.02% for the 91-day bill, down 7 basis points, while the 184-day bill settled at 10.16%, down 11 basis points. The 364-day bill held steady at 10.16%.
Foreign investor participation in the government securities market remained unchanged on a week-on-week basis, with total foreign holdings holding flat. Primary dealer activity and banking sector participants drove most of the day’s volume.
The most recent Treasury Bond auction, held on June 11, recorded a Phase 1 weighted average yield of 11.65% and a Phase 2 weighted average yield of 12.69%. Phase 2 results of the subsequent bond auction are pending.
Total outstanding government securities stood at LKR 18,438.71 million as of June 23, comprising LKR 16,070 million in Treasury Bonds and LKR 2,369 million in Treasury Bills.
Key Numbers:
| Tenor | June 23 Yield | June 16 Yield | Weekly Change |
|---|---|---|---|
| 2-Year | 10.70% | 10.98% | -28 bps |
| 3-Year | 10.80% | 11.10% | -30 bps |
| 4-Year | 11.20% | 11.45% | -25 bps |
| 5-Year | 11.35% | 11.60% | -25 bps |
| 10-Year | 11.90% | 12.15% | -25 bps |
| 13-Year | 12.10% | 12.33% | -23 bps |
| 91-Day T-Bill | 10.02% | — | -7 bps (auction) |
| 184-Day T-Bill | 10.16% | — | -11 bps (auction) |
Business Impact:
Falling bond yields reduce the cost at which the government raises long-term debt, which over time can ease pressure on the national budget. For businesses, a declining yield curve typically precedes lower lending rates, reducing the cost of corporate borrowing. Fixed income investors holding existing bonds benefit from capital appreciation as prices move inversely to yields. Fund managers and treasury departments with exposure to government securities will note the improved mark-to-market valuations across portfolios this week.
Source Attribution:
Source: Colombo Stock Exchange market data, Central Bank of Sri Lanka statistics and publicly available market information.