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• Maturities top Rs. 1.4 t, with net debt increase of Rs. 177.6 b
• T-bill yields decline, market sees mixed trading activity and fluctuating sentiment

Sri Lanka’s domestic debt has increased by Rs. 177.6 billion (year-to-date), as maturities exceed Rs. 1.4 trillion with yields trending downward, First Capital said.

Accordingly, the government has settled Rs. 1.43 trillion of maturities as of 11 March so far in the year, while issuing Rs. 1.61 trillion, increasing the outstanding debt by Rs. 177.6 billion.

Moreover, the three-month Treasury bill (T-bill) yield has decreased by 95 bps (year-to-date), while six-month T-bill yield has decreased by 85 bps.

In February, Sri Lanka’s fixed income market experienced a month marked by mixed trading activity, fluctuating yields, and changing investor sentiment.

“The secondary market saw intermittent buying interest, particularly in the early and late parts of the month, while trading volumes remained thin at times. T-bond and T-bill auction yields declined consistently across all maturities, continuing a trend from January,” First Capital said.

Further, it said that mid-month activity was more cautious, with market participants awaiting the government's budget speech, which took place on the 17 February. Post-budget, buying momentum picked up, leading to increased trading volumes in the latter part of the month.

“Despite a cautious outlook at times, the market exhibited resilience, with yields trending downward and continued investor engagement throughout February,” it added.

First Capital data also revealed that the interest rate spread has decreased to 0.8% by end-February from 1.5% at the end of 2024, as average weighted prime lending rate (AWPLR) is still ranging between 8-9%.