U.S. tariff proposals dampen investor sentiment; yield curve increases by 10-15bps

By First Capital Research

After the announcement of reciprocal tariffs by the U.S. yesterday morning, the secondary market experienced selling pressure, causing the yield curve to rise across the board. 

During the morning session, the 15.09.2028 and 01.10.2028 maturities traded at the rates of 10.35% and 10.40%, respectively, while the 15.06.2029 and 15.09.2029 maturities traded at the rate of 10.75%. 
As more clarity emerged, yields across the curve adjusted. In the latter part of the yesterday’s trading session, the 15.02.2028, 15.07.2028, and 15.10.2028 maturities traded at 10.05%, 10.10%, and 10.30%, respectively. Additionally, the 15.06.2029, 15.09.2029, 15.05.2030, and 15.10.2030 maturities traded at 10.50%. 

In the forex market the LKR showcased an appreciation against the greenback, standing at Rs. 296.1/USD in comparison to Rs. 296.2/USD registered on the previous day. 

Meanwhile, overnight liquidity in the banking system rose to Rs. 183.7bn from Rs. 174.4bn seen previous day, whilst CBSL holdings of government securities remained stagnant.