Secondary Bond Market Remains Stagnant

Weekly report for the week ending 25^th July 2025 – Courtesy Wealth Trust Securities Ltd

Secondary Bond Market Remains Stagnant
Money Market Liquidity Improves
Rupee Depreciates

The secondary bond market remained largely quiet last week, with yields holding broadly steady.

Traders adopted a cautious, wait-and-see stance from early in the week ahead of the 4^th Monetary Policy Review on Wednesday (23rd July), keeping the market in consolidation mode.

At its 4^th Monetary Policy Review for 2025, the CBSL held the Overnight Policy Rate at 7.75%, following a 25-bps cut in May. Accordingly, the SDFR and SLFR remained at 7.25% and 8.25%, while the SRR was unchanged at 2.00%. The policy outcome, widely anticipated and largely priced in, left overall market dynamics largely unchanged, with trading confined to a few selected maturities.

Overall, the week was characterized by thin volumes and limited price action. Bond yields remained anchored broadly around prevailing levels, albeit drifting down marginally at the latter part of the week.

The trading activity in the secondary bond market was concentrated across short to medium-term maturities, with yields holding within tight ranges. The short tenor 01.05.27 traded at 8.39%, while the 15.09.27 maturity changed hands between 8.54% and 8.55%. Among the 2028 maturities, 15.02.28 traded at 8.81%, 01.07.28 at 8.95%, 15.10.28 between 9.00% to 9.03%, and 15.12.28 at 9.05%. In the 2029 space, 15.09.29 saw trades at 9.45%, while 15.10.29 traded in a range of 9.45% to 9.48%, and 15.12.29 between 9.53% and 9.55%. On the medium end of the curve, the 15.10.30 and 15.03.31 maturities were traded at 9.81% and 10.11%, respectively.

Meanwhile at the weekly Treasury bill auction held last Wednesday, the weighted average yield rates remained broadly stable, following two consecutive weeks of across-the-board increases. Accordingly, the weighted average rate on the 91-day tenor stayed flat at 7.62% and the 182-day tenor also remained unchanged at 7.91%. However, the weighted on 364-day tenor recorded a marginal decline of 01 basis point to 8.03%. The auction raised Rs. 76.81 billion out of the total offered amount of Rs 111.00 billion in successful bids.

The foreign holding in Rupee Treasuries recorded a marginal outflow, following two weeks of net inflows, amounting to Rs 0.41 billion and as a result the total holding reduced to Rs. 97.78 billion as at 17^th July 2025.

The daily secondary market Treasury bond/bill transacted volumes for the first four days of the week averaged at Rs. 6.94 billion.

In money market, the total outstanding liquidity surplus in the inter-bank money market increased to Rs. 93.89 billion as at the week ending July 25^th, 2025, from Rs. 87.01 billion recorded the previous week. The weighted average interest rates on call money and repo were recorded within the ranges of 7.79%-7.84% and 7.81%-7.85% respectively while the Central Bank of Sri Lankas (CBSL) holding of Government Securities was registered at Rs. 2,508.92 billion as at the July 25^th, 2025, unchanged against the previous week’s closing level.

In the Forex market, the USD/LKR rate on spot contracts was seen depreciating to close the week at Rs. 301.90/302.00 as against the previous week’s closing level of Rs. 300.70/301.00, subsequent to trading at a high of Rs. 301.60 and a low of Rs. 302.00.

The daily USD/LKR average traded volume for the first four trading days of the week stood at US $ 55.27 million.