News & market updates

Secondary bond market ended the week bearish as yields rose across the curve (trades ranged about 11.95%–13.30%) and foreign holdings fell by Rs.4.77bn to Rs.121.33bn. Pressure came from a 100bp policy rate hike, rising T‑bill yields, tighter liquidity and FX weakness (USD/LKR ~335.75/336.25).

The Central Bank of Sri Lanka said the financial system remained resilient in Q1 2026 despite rising risks, with banking credit up 24.4% YoY and Stage 3 loans down to 9.4%. It imposed a 70% LTV cap on gold loans and cut vehicle LTVs by 10pp from 25 May, noted $103.4m foreign outflows and a 100bp policy-rate hike driving higher yields.

Brent crude futures rose $3.20 (3.39%) to $96.24 a barrel after Israeli strikes on Lebanon and reported explosions in Iran raised Middle East tensions, with U.S. crude up $2.87 at $93.41 as supply concerns pushed prices higher.

Fitch cut its 2026 global growth forecast by 0.2pp to 2.4% and raised its 2026 Brent crude assumption to USD87/bbl (from USD70/bbl) due to an oil shock from the US–Iran war. Strong IT-related investment is partly cushioning the hit, while central banks’ policy paths have shifted with rates expected to hold this year and cuts delayed until 2027 in some cases.

The Ceylon Chamber of Commerce will hold the 26th Sri Lanka Economic and Investment Summit on 12–13 October 2026. The Summit will focus on economic growth, investment, trade, fiscal and structural reforms, energy security and sustainability, healthcare, and digital transformation.

Foreign investors sold about US$14.7mn of Sri Lanka government securities in the week to June 4 despite a 100bp hike in the Central Bank's Overnight Policy Rate. The rupee has fallen ~7.8% YTD through June 5 and four-week net outflows total around US$65mn amid higher fuel imports and Middle East risks.

Sri Lanka's Central Bank sold a net US$211.3mn in May (bought US$12mn, sold US$223.3mn) as the rupee came under heavy downward pressure and touched a four-year low. Gross official reserves nonetheless rose 1.7% to US$6,873mn by end-May amid higher fuel import bills and dollar demand.

Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando said recent rupee depreciation — from about Rs.331.50/332.50 on Monday to Rs.336.00/338.00 on Friday — was driven by market forces, higher global fuel prices and FX demand, and denied it signals a broader economic crisis.

IMF urged stronger social safety nets after Sri Lanka's national poverty threshold rose to a record Rs. 17,117 per person per month in April (up Rs. 427 MoM and Rs. 775 YoY). The government has expanded and topped up Aswesuma benefits, added a Rs. 8.5bn allocation and plans to extend and recertify beneficiaries through the social registry.

LAUGFS Gas PLC said domestic LPG prices will remain unchanged for June, keeping the Colombo District 12.5 kg cylinder at Rs. 6,245 as it absorbs higher global procurement, freight and rupee-depreciation costs. Litro Gas Lanka also held May prices for June, keeping its 12.5 kg cylinder at Rs. 4,765.

LMD-PEPPERCUBE's May Business Confidence Index shows confidence remained subdued: 28% expect the economy to improve over the next 12 months, 56% expect conditions to stay the same and 16% expect them to worsen. Respondents cited fuel and electricity price hikes, rising living costs and geopolitical tensions, with cautious sales, investment and employment outlooks.

Deputy Finance Minister Anil Jayantha said Sri Lanka's rupee is returning to a normal state through market forces, with the Central Bank's buying rate between 320–330 after a near four-year low of 354; he cited export, tourism and remittance inflows and interventions stabilising fuel-driven fluctuations.

Oil prices edged down after Oman said operations at Mina al Fahal port were proceeding normally; Brent was $94.79/bbl and U.S. WTI $92.48/bbl, with both contracts set to post their first weekly gain in three weeks amid Middle East tensions.

State-owned enterprises' combined profit fell 17.6% to Rs. 444.4 billion in 2025, driven by the Ceylon Electricity Board's swing to a Rs. 38.7 billion loss. Excluding CEB, the remaining 50 SOEs posted a 21.5% rise in profits to Rs. 483.2 billion, with Bank of Ceylon the top contributor and several SOE and power-sector reforms advanced.

Secondary bond market remained subdued with yields edging higher after the Treasury Bill auction; short- to mid-dated maturities traded around 11.95%-12.00% while longer-dated lines traded up to about 13.30%. Money-market rates were elevated (call 9.16%, REPO 9.20%), net liquidity surplus Rs.111.94bn, and USD/LKR closed at 336.75/337.50.

Hayleys Mobility (part of Hayleys group) launched the JAECOO J5 HEV hybrid SUV, priced at LKR 19.9 million with an introductory LKR 1 million discount for the first 100 customers. The J5 HEV delivers 221 hp, 18.9 km/l fuel efficiency, a >950 km range, and is backed by 7-year vehicle and 8-year battery warranties.

Oil prices fell after Israel and Lebanon agreed a ceasefire, with Brent down $1.14 to $96.67 and U.S. WTI down $0.90 to $95.12. The ceasefire raised hopes of wider de‑escalation and reopening the Strait of Hormuz, while U.S. crude stocks fell 8 million barrels and Chinese demand slowed.

Fitch upgraded the Maldives' Long-Term Foreign-Currency IDR to 'CCC-' from 'CC', citing eased default risks after successful repayment of its sukuk. Fitch nonetheless flagged high external and fiscal vulnerabilities, wide twin deficits, low reserves, and exposure to an Iran-war energy shock and tourism dependence.

Treasury bill yields rose for a third consecutive week — 91-day at 9.84%, 182-day at 10.01% and 364-day at 10.02% — and the auction was undersubscribed, raising Rs.111.16bn of Rs.140bn offered (79.40% subscription). Secondary bond market remained bearish, net liquidity surplus was Rs.101.71bn and USD/LKR closed at 335.00/337.00.

ASPI fell 0.75% (166.55 pts) to 22,011.10, extending losses to a third session with turnover over Rs.2bn and foreigners net sellers of Rs.410.26mn. Negative contributors included Dialog, Sampath, Ceylon Beverage, Ceylon Cold Stores and Colombo Dockyard; Teejay Lanka, John Keells and Commercial Bank led turnover.

HayWind One, part of the Hayleys group, received the first 25 MW (five of ten turbines) for its 50 MW Mannar wind farm at Trincomalee Port; transfers to the Mannar site will continue over the next three months. The project is expected to yield about Rs.100 billion in imported fuel savings over 20 years.

Hayleys' wind arm received the first 25 MW of turbines for the 50 MW Mannar wind farm, with components landing at Trincomalee Port and transfers to the Mannar site to continue over the next three months. The project is expected to deliver about Rs.100 billion in imported fuel savings over 20 years.

Oil prices rose as Middle East hostilities escalated and U.S.-Iran talks stalled; Brent was $96.81/bbl and WTI $94.67, amid Iranian missile activity, U.S. strikes, falling U.S. crude stocks and IEA warnings of low global inventories.

Secondary bond market remained bearish with yields rising across the curve and a Rs. 140 billion Treasury Bill auction scheduled today. Call money stayed above 9% for a fourth day (9.14%) and USD/LKR closed at 332.50/333.50.

Cabinet approved Rs. 827 million in lubricating oil contracts for the Sapugaskanda Power Plant, awarding Rs. 392.47m (316,000 litres) to Lanka IOC and Rs. 434.86m (304,000 litres) to Chevron Lubricants to cover 2026/27 operational requirements.

Colombo Stock Exchange dipped midday as the ASPI fell 0.10% to 22,155.45 with market turnover at 981 million rupees; Consumer Durables & Apparel led turnover at 348.1 million rupees. Central Finance, Hemas and Browns gained, while Access Engineering, Ceylon Cold Stores and Sampath Bank were down.

Power Minister Anura Karunathilaka defended the latest fuel price hike as necessary to avoid supply disruption, noting CPC's May fuel import bill was about $524m. CPC said it loses Rs129/l on diesel and Rs60/l on Octane 92, Treasury support (~Rs57bn) may run out by end-June, and the government will enforce QR quotas to cut consumption.

Container Transport Owners Association increased container transport charges by 5% effective 1 June, citing higher fuel costs after the Ceylon Petroleum Corporation raised fuel prices on 31 May. The move will raise logistics costs for importers and exporters nationwide.

The LMD-PEPPERCUBE Business Confidence Index rose seven points to 148 in May. Consecutive fuel price hikes, a roughly 5% fall in the Sri Lankan rupee year-to-date, higher electricity tariffs and a US$267m drop in official reserves have kept business sentiment fragile amid geopolitical tensions and rising cybercrime concerns.

The IMF completed its combined Fifth and Sixth reviews under Sri Lanka's EFF and released US$695m, bringing total IMF disbursements to US$2.4bn. The IMF cut 2026 growth to 3.0% and warned that higher fuel costs, a sharp drop in tourism and cyclone damage have flipped the current account to a projected 0.5% of GDP deficit.