Sri Lanka's secondary bond market opened the week with steady yields and moderate trading activity, supported by the Central Bank Governor's recent comments suggesting inflation will moderate toward target levels by late 2026.
The secondary bond market consolidated broadly at the start of the week, with limited but balanced activity across selected tenors. While some profit-taking pressure emerged following recent gains, selling interest remained contained as positive sentiment supported the market undertone. Participants adopted a cautious approach, monitoring price levels closely amid the moderated trading activity.
Central Bank Governor Dr. Nandalal Weerasinghe's recent remarks in an interview with Bloomberg provided reassurance to market participants. The Governor indicated that inflation is expected to moderate toward the Central Bank's 5% target during the latter half of 2026 and into 2027. He noted that the economy is already showing signs of stabilization following monetary tightening measures implemented in May and government efforts to control imports. The Governor projected economic growth of approximately 4% to 5% during the second half of the year, suggesting that current monetary restraint would not significantly hamper expansion. He also stated that inflation would remain manageable if oil prices stayed around $80 per barrel through year-end.
On specific bond yields, the 15.02.28 and 15.03.28 maturities traded at 10.01% and 10.00% respectively, while longer-dated bonds showed higher yields, with the 15.12.32 declining to 11.30% and the 15.10.34 trading at 11.70%. In the money market, a net liquidity surplus of Rs. 161.35 billion was recorded, with the Central Bank absorbing Rs. 111.35 billion through its Standing Deposit Facility at 8.25%. The rupee continued its appreciation trend, closing spot contracts at Rs. 332/332.20 against the dollar, with total USD/LKR trading volume reaching $112.48 million.
