100bps policy rate hike lifts yields across the curve

By First Capital Research

The Monetary Policy Board of the Central Bank of Sri Lanka, at its meeting held on 25th May 2026, decided to increase the Overnight Policy Rate (OPR) by 100bps to 8.75% from 7.75%, following a careful assessment of evolving domestic and global economic conditions and the overall outlook.

Following the monetary policy announcement, the secondary market entered a standstill, with trading activity across maturities remaining muted. However, the secondary market yield curve shifted upward, adjusting in line with the rate hike.

Meanwhile, the PDMO raised Rs. 95.6bn at yesterday’s T-Bill auction, below the initially offered amount of Rs. 140.0bn, despite receiving total bids worth Rs. 172.3bn. 

The PDMO accepted bids exceeding the offered amount for the 3M maturity, raising Rs. 71.2bn, while accepting lower amounts for the 6M and 12M maturities at Rs. 14.4bn and Rs. 9.9bn, respectively. 

Weighted average yields increased in line with yesterday’s OPR hike, with the 3M T-Bill yield rising by 118bps to 9.36%, the 6M T-Bill yield increasing by 143bps to 9.68%, and the 12M T-Bill yield climbing by 134bps to 9.83%.

Overnight liquidity in the banking system expanded to Rs. 142.31bn from Rs. 136.98Bn recorded previously.