Secondary Bond market yields broadly steady; activity subdued

Tuesday, 12 May 2026 01:03 - - {{hitsCtrl.values.hits}}

Rs. 250 b T-Bond auction in the spotlight

By Wealth Trust Securities

The secondary Bond market commenced the week with yields holding broadly steady across the majority of the yield curve and consolidating.

External factors remained firmly in focus with the ongoing Middle Eastern tensions and elevated crude oil prices continued to weigh on sentiment. Mixed geopolitical developments provided an unclear backdrop. It was reported that despite ongoing diplomatic processes and progress, the US rejected Iran’s latest peace proposal response.

However, positive developments on the domestic front provided a strong counterbalance. The latest fiscal performance data for February 2026 reflected a robust improvement, with revenue and grants rising 35.5% YoY to Rs. 1.03 trillion during the first two months of the year. Consequently, the primary surplus expanded by 66.1% YoY to Rs. 545.42 billion. The overall budget balance recorded a surplus of Rs. 169.71 billion, compared to a deficit of Rs. 86.62 billion in the corresponding period of 2025, marking a year-on-year turnaround of nearly 296%.

As a result, investor positioning in the secondary Bond market stayed defensive. Activity was subdued as market participants largely adopted a wait-and-see approach amid prevailing uncertainty and ahead of the upcoming Treasury Bond Auctions. However, transaction volumes remained at healthy levels due to the execution of several block trades.

The 15.12.26 maturity traded at the rate of 8.45%. The 15.02.28 maturity traded at the rate of 9.60% and the 15.10.28 and 15.12.28 maturities at the rates of 9.77% and 9.80%-9.78% respectively. The 15.06.29, 15.09.29 and 15.10.29 maturities traded at the rates of 9.85%, 9.90% and 9.90% respectively. The 01.03.30 and 15.05.30 maturities traded at the rates of 10.10% each. The 15.06.34 maturity traded within the range of 11.22%-11.18%.

This comes ahead of the Treasury Bond auctions, scheduled to be conducted today, 12 May 2026. The round of auctions will have a total offered amount of Rs. 250 billion across four available maturities.

The auction will be comprised of: Rs. 80 billion from a 1 August 2030 maturity bearing a coupon rate of 10%; Rs. 50 billion from a 15 June 2034 maturity bearing a coupon rate of 10.75%; Rs. 70 billion from a 15 August 2036 maturity bearing a coupon rate of 10.85%; Rs. 50 billion from a 15 August 2039 maturity bearing a coupon rate of 10.50%. The settlement for which will be held on 15 May 2026.

For context at the previous round of Treasury Bond Auction conducted on 9 April was undersubscribed only raising Rs. 82.09 billion out of Rs 100 billion on offer at the 1st and 2nd phases — across three available maturities. The bids received to accepted amount ratio stood at 1.80 times.

Maturity-wise the results were as follows:

The shorter tenor 01.07.30 maturity was issued at a weighted average yield of 10.12%, the maturity wise offered amount was fully accepted at the 1st phase.

The 15.06.34 maturity was issued at the weighted average yield of 11.16%. This tenor was undersubscribed.

The longer tenor 01.07.37 maturity was undersubscribed and issued at a weighted average yield of 11.19%.

In money market, the net liquidity surplus in the money market was recorded at Rs. 262.96 billion yesterday. As an amount of Rs. 183.06 billion was deposited at Central Bank’s SDFR (Standing Deposit Facility Rate) of 7.25% as against an amount of Rs. 0.10 billion withdrawn from the Central Bank’s SLFR (Standing Lending Facility Rate). In addition, the Domestic Operations Department (DOD) of the Central Bank of Sri Lanka drained out an amount of Rs. 80 billion by way of overnight repo auction at a weighted average rate of 7.70%.

Forex market

The USD/LKR rate on spot contracts was seen closing the day at Rs. 322.00/322.40 as against the previous day’s spot closing level of Rs. 321.75/321.85.

The total USD/LKR traded volume for 08th May was $ 77.25 million.

(References: Central Bank of Sri Lanka, Bloomberg E-Bond trading platform, Money broking companies)