Secondary Bond market kicks off action-packed week with bang

• Monetary Policy Review No. 03 and Rs. 140 b T-Bill Auction in focus
• Rs. 240 b Treasury Bond auction details announced

By Wealth Trust Securities

The secondary Bond market kicked off the week on a bullish note, extending the positive momentum and recovery observed at the tail end of the previous week. 

Rates were seen declining considerably on the back of aggressive buying interest. Activity and transaction volumes were seen at robust levels during the rally. 

The key driver was optimism around progress on a potential US-Iran deal to end the war which included a 60-day ceasefire and the reopening of the Strait of Hormuz. This coincided with an approximately 5% drop in Brent Oil prices which fell and held below $ 100. Adding to the optimism was a further appreciation of the rupee and an easing in global bond market yields which also experienced a recovery.

Market activity tapered off towards the latter part of the day as the market adopted a defensive stance ahead of an action-packed week.

Accordingly, the 15.09.27 maturity traded at the rate of 9.60%.  The 01.07.28 maturity saw its yield drop from an intraday high of 10.18% to a low of 10.00%. The 15.02.28 and 15.12.28 maturities traded lower at the rates of 9.95% and 10.08% respectively. The 15.06.29 and 15.12.29 maturities traded at the rates of 10.25%-10.10% and 10.22% respectively. The 01.08.30 maturity traded at the rate of 10.30%. The 01.10.32 maturity saw its yield decline sharply with the maturity taken down the range of 11.25% to 11.00% on the back of sizeable volumes. The 01.06.33 maturity traded down the range of 11.30% to 11.20% and the 15.06.34 maturity traded at the rate of 11.35%. The 15.08.36 maturity traded at the rate of 11.45%.

This comes ahead of the announcement of the decision for the Monetary Policy Review Meeting No. 03 for 2026 which is due to be announced at 7.30 AM today, 26 May.

The Treasury Bill auction also scheduled for today, will have a total amount of Rs. 140 billion on offer. This will comprise of Rs. 65 billion offered on the 91-day maturity, Rs. 45 billion on the 182-day maturity and Rs. 30 billion on the 364-day maturity. This is below the maturity in line with the scheduled auction, which is estimated to be approximately Rs. 182 billion.

To recap the immediately previous Treasury Bill auction conducted last Wednesday, was undersubscribed, raising the only 48.03% or Rs. 67.24 billion out of the Rs. 140.00 billion on offer at the first phase in competitive bidding. The bid to offer ratio stood at 1.66 times.

Rates were seen increasing which reversed the decline observed the previous week. Accordingly, the weighted average yield rates on the 91-day tenor increased by 05 basis points to 8.18% and the 182-day tenor increased by 02 basis point to 8.25%. However, the 364-day tenor remained unchanged at 8.49%.

In addition, this will be followed by a Rs. 240 billion round of Treasury Bond auctions due to be held on the 27th of May. The round of auctions will have a total offered amount of Rs. 240.00 billion across three available maturities.

The auction will be comprised of: Rs. 90 billion from a 1 August 2030 maturity bearing a coupon rate of 10%; Rs. 70 billion from a 15 January 2033 maturity bearing a coupon rate of 11.20%; Rs. 80.00 billion from a 15 March 2035 maturity bearing a coupon rate of 11.50%; the settlement for which will be held on 1 June 2026.

In the money market, the net liquidity surplus was recorded at Rs. 136.99 billion yesterday. An amount of Rs 120.59 billion was deposited at Central Bank’s SDFR (Standing Deposit Facility Rate) of 7.25% as against an amount of Rs. 83.60 billion withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 8.25%. In addition, the Domestic Operations Department (DOD) of the Central Bank of Sri Lanka drained out an amount of Rs. 100 billion by way of overnight repo auction at a weighted average rate of 7.75%.

The weighted average rates on overnight call money and Repo were recorded at 7.94% and 8.00% respectively.

Forex market 

In the forex market, the USD/LKR rate on spot contracts closed at the rate of Rs. 325.50/327.00 as against the previous days closing of Rs 329.00/335.00.

The total USD/LKR traded volume for 22 May 2026 was $ 92.62 million.  

(References: Public Debt Management Office- Ministry of Finance, Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)