Secondary Bond market starts off on bearish footing

Tuesday, 2 June 2026 00:46 - - {{hitsCtrl.values.hits}}

By Wealth Trust Securities

The secondary Bond market commenced the week on a bearish note, reversing part of the recovery witnessed towards the latter stages of the previous week. Rates edged higher across the curve amid selling pressure and cautious investor sentiment. While activity was relatively muted, transaction volumes were seen supported by the execution of several block trades at the elevated yield levels.

The upward move in yields was driven by a combination of domestic and external factors. Optimism surrounding a potential US-Iran agreement faded after indications that negotiations remained unresolved, contributing to renewed strength in crude oil prices. Brent crude climbed back above $ 93 per barrel, raising concerns over inflationary pressures and the country’s external sector outlook. Further pressure stemmed from rising global bond yields, particularly in the US and Japan, where Government Bond yields reached multi-decade highs.

Domestically, sentiment remained cautious following last week’s 100 basis point Monetary Policy rate hike and the corresponding sharp rise in Treasury Bill and Bond yields. Tighter banking system liquidity and rising money market rates also weighed on sentiment, translating into higher funding costs.

Accordingly, the 01.08.30 maturity traded higher up the range of 11.95% to 12.10%. The 15.01.33 maturity traded up the range of 12.30% to 12.45% and the 01.06.33 maturity traded at the rate of 12.75%. The 15.03.35 maturity traded up the range of 12.95% to a high of 13.11%.

In the money market, the net liquidity surplus was recorded at Rs. 102.46 billion yesterday. An amount of Rs 105.86 billion was deposited at Central Bank’s SDFR (Standing Deposit Facility Rate) of 8.25% as against an amount of Rs. 63.40 billion withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate) of 9.25%. In addition, the Domestic Operations Department (DOD) of the Central Bank of Sri Lanka drained out an amount of Rs. 50 billion by way of overnight repo auction at a weighted average rate of 8.75% as well as a short-term two-day term repo auction at the weighted average rate of 8.75%.

The weighted average rates on overnight call money and Repo were recorded at 9.12% and 9.17% respectively.

Forex market

In the Forex market, the USD/LKR rate on spot contracts closed at the rate of Rs. 331.50/332.50 as against the previous day’s closing of Rs 330.00/332. The total USD/LKR traded volume for 29 May 2026 was $ 97 million.

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