CBSL holds policy rate steady; modest uptick in secondary market activity

By First Capital Research

The Central Bank of Sri Lanka (CBSL), at its meeting held on July 22, 2025, decided to maintain the Overnight Policy Rate (OPR) at the current level of 7.75%. The CBSL has indicated that the current monetary policy stance will help steer inflation towards the target of 5% in the period ahead while supporting growth.

The secondary market experienced a modest uptick in trading activity compared to the past few sessions this week, though overall volumes remained subdued. At the shorter end of the yield curve, the 15.09.2027 maturity traded at 8.55%, the 01.07.2028 at 8.95%, the 15.10.2028 at 9.03% and the 15.12.2028 maturity saw trades at 9.05%, Further along the curve, 15.10.2029 changed hands at 9.47%.

The CBSL concluded its weekly Treasury Bill auction yesterday, raising LKR 19.9Bn, well below the initially offered LKR 111.0Bn. The 3M bill generated LKR 1.2Bn, with its weighted average yield remaining unchanged at 7.62%. The 6M bill raised LKR 9.4Bn, with yield remaining unchanged at 7.91%. Meanwhile, the 12M bill drew LKR 9.2Bn, with its yield marginally decreasing by 1bp to 8.03%.

In the forex market, the LKR appreciated against the greenback, closing at LKR 301.7/USD, compared to the previously seen rate of LKR 301.8/USD. Meanwhile, overnight liquidity in the banking system contracted to LKR 93.5Bn from the previously seen level of LKR 98.4Bn.