Bond market yields edge higher

Tuesday, 29 September 2026 04:16 - - {{hitsCtrl.values.hits}}

Bloomberg predicts ‘no change’ at Monetary Policy Review No. 05

By Wealth Trust Securities

The secondary Bond market kicked off the fresh trading week yesterday with the bearish momentum seen towards the close of the previous week ultimately persisting.

While yields initially edged lower on the back of some early buying interest, the move proved short-lived as the session progressed. The news flow leaned bearish. Renewed concerns surrounding the Middle East pushed crude oil prices higher and placed upward pressure on global Bond yields, reigniting concerns over inflationary and external sector pressures.

Against this backdrop, selling interest was witnessed, quickly reversing the early decline in yields. Rates subsequently moved back towards previous levels and higher across selected maturities, with the market closing the session on a bearish footing. Activity and transaction volumes were seen at moderate levels as market participants adopted a cautious stance ahead of the upcoming Monetary Policy Decision.

The 01.08.30 maturity traded up from an intraday low of 11.15% to a high of 11.28%. The 15.10.30 and 01.02.31 traded at the rates of 11.20% and 11.25% during the early session while was quoted higher at the close of the day. The 15.12.32 traded up the range of 11.70%-11.75%. The 15.01.33 traded at the rate of 11.85% and the 01.11.33 traded higher at the rate of 11.90%. The 15.10.34 maturity trade at the rate of 12% and the 15.06.35 traded at the rate of 12.15%.

Bloomberg, in an article titled “Sri Lanka Central Bank Likely to Hold, But Oil Raises Hike Risk,” expects the Central Bank of Sri Lanka to keep its policy rate unchanged at 8.75% at the 30 September meeting.

The report noted that inflation accelerated to 8% year-on-year in August and is expected to rise further in the near term, largely due to higher food and fuel prices, in line with the CBSL’s own expectations. However, Bloomberg highlighted signs of moderating domestic demand, with economic growth cooling alongside slower growth in non-oil imports and private sector credit. The report also pointed to the recent strengthening of the rupee and improvement in foreign exchange reserves since the July policy meeting.

Bloomberg further noted that the CBSL may prefer to allow more time for the larger-than-expected rate hike delivered in May to work through the economy.

In the money market, the net liquidity surplus was recorded at Rs. 151.12 billion. Rs. 92.62 billion was deposited at the Central Bank’s SDFR (Standing Deposit Facility Rate) of 8.25%. In addition, the Domestic Operations Department (DOD) of the Central Bank of Sri Lanka absorbed Rs. 58.50 billion in liquidity through a series of repo auctions. This comprised Rs. 38.50 billion via an overnight repo auction and Rs. 20 billion through a 7-day term repo auction at rates of 8.75% each.

The weighted average yields on overnight call money and repos were recorded at 8.95% and 9.02% respectively.

Forex market

The USD/LKR rate on spot contracts was seen closing at Rs. 330.95/331.05 yesterday, with the Rupee depreciating against the USD compared to Rs. 330.40/330.50 recorded on the previous day.

The total USD/LKR traded volume for 25 September amounted to $ 52.75 million.

(References: Public Debt Management Office - Ministry of Finance, Central Bank of Sri Lanka, Bloomberg E-Bond Trading Platform, Money Broking Companies)