Government securities yields firmed across the curve this week, with the steepest increases concentrated in the 5-to-7-year segment, even as short-term rates eased slightly at Thursday’s T-bill auction.
Yields on Sri Lanka’s government securities rose across the mid-to-long end of the curve this week, with the sharpest moves concentrated in the 5-to-7-year segment of maturities, according to the latest market data.
The 15.03.2031 (5-year), 01.10.2032 (6-year) and 01.06.2033 (7-year) maturities each rose 30 basis points week-on-week, with the 5-year yield climbing to 11.90%, the 6-year to 12.05%, and the 7-year to 12.15%. Further out the curve, the 8-year maturity rose 20 basis points to 12.20%, while the 4-year and 9-year tenors each added 10 basis points, to 11.55% and 12.25% respectively. The 11-year maturity also firmed, up 15 basis points to 12.65%.
Shorter-dated maturities were comparatively steady. The below-91-day segment eased 20 basis points to 9.85%, while the 6-month, 1-year and 2-year tenors were largely unchanged.
Trading activity was observed across several maturities during the session, with the 15.09.2029, 15.10.2029 and 15.12.2029 bonds all changing hands at 11.25%. The 01.07.2030 maturity attracted notable buying interest from foreign investors, while the 01.07.2037 bond traded at 12.70%.
At Thursday’s T-bill auction, the 91-day bill was accepted at a yield of 9.95%, down 18 basis points from the prior auction, while the 184-day and 364-day yields held steady at 10.24% and 10.20% respectively. Total bids received across the two phases of the auction reached LKR 453,660Mn against an offered amount of LKR 140,000Mn in the primary phase.
Foreign holdings of rupee-denominated government securities rose 4.54% week-on-week to LKR 176,561Mn, extending a steady climb from LKR 121,331Mn recorded in early June. Overnight liquidity in the banking system contracted to LKR 156.54Bn from LKR 175.20Bn in the prior session.
Business Impact
The rise in mid-to-long-tenor yields signals higher benchmark costs for longer-duration government borrowing, a reference point that filters through to corporate bond pricing and fixed-rate lending further along the curve. For businesses planning longer-term financing, the steepening in the 5-to-7-year segment specifically is worth monitoring, as it may indicate shifting investor expectations for that horizon. The continued rise in foreign holdings of government debt, even as short-term rates eased, points to sustained external demand for local fixed income at current yield levels — a dynamic separate from the ongoing foreign selling seen in equities.
Key Numbers
| Tenure | Yield (Today) | Change (WoW) |
|---|---|---|
| 5Y (15.03.2031) | 11.90% | +30bps |
| 6Y (01.10.2032) | 12.05% | +30bps |
| 7Y (01.06.2033) | 12.15% | +30bps |
| 8Y (15.06.2034) | 12.20% | +20bps |
| 9Y (15.06.2035) | 12.25% | +10bps |
| 11Y (15.01.2037) | 12.65% | +15bps |
| 91-Day T-Bill | 9.95% | -18bps |
| Foreign Holding of GSecs | LKR 176,561Mn | +4.54% WoW |
| Overnight Liquidity | LKR 156.54Bn | down from LKR 175.20Bn |
Source Attribution
Source: Central Bank of Sri Lanka statistics and publicly available market information.