Colombo, Sri Lanka – August 31, 2026 – The Central Bank of Sri Lanka (CBSL) today concluded its crucial Open Market Operations (OMOs) for August 31, 2026, revealing significant activity in the money markets as it continued its efforts to manage systemic liquidity and maintain price stability. The Market Operations Department of the CBSL conducted a series of repo auctions and facilitated overnight interbank transactions, with key rates and volumes indicating prevailing market conditions.
Overnight Money Market Dynamics
The overnight money market saw active participation, with the Call Money Market recording a weighted average rate of 8.85%. Transactions ranged from a minimum of 8.80% to a maximum of 8.88%, with total gross amounts reaching Rs. 40,220 million and net amounts settling at Rs. 38,970 million. The Repo Market, a key barometer of short-term liquidity, reported a weighted average rate of 8.91%, with rates fluctuating between 8.88% and 8.95%. The total gross and net amount in the Repo Market stood at a substantial Rs. 85,933 million.
CBSL Open Market Operations: Auctions Recap
The CBSL conducted three distinct repo auctions to manage liquidity across different tenors:
i. Overnight Repo Auction
- Amount Offered: Rs. 40,000 million
- Bids Received: Rs. 52,000 million
- Amount Accepted: Rs. 40,000 million
- Weighted Average Yield: 8.75%
- Accepted Rate Range: 8.73% (Minimum) to 8.75% (Maximum)
The overnight auction was oversubscribed, indicating strong demand for short-term liquidity within the banking system, with the CBSL accepting the full offered amount to meet immediate funding needs at a weighted average yield of 8.75%.
ii. Short Term Repo Auction (2 Days)
- Amount Offered: Rs. 20,000 million
- Bids Received: Rs. 10,000 million
- Amount Accepted: Rs. 10,000 million
- Weighted Average Yield: 8.75%
- Accepted Rate Range: 8.75% (Minimum) to 8.75% (Maximum)
This auction, maturing on September 2, 2026, saw a lower demand than offered, resulting in the CBSL accepting only Rs. 10,000 million. This undersubscription suggests that while overnight liquidity was in demand, the need for slightly longer-term funds might have been less acute at this specific tenor, or participants may have preferred longer-dated instruments.
iii. Long Term Repo Auction (30 Days)
- Amount Offered: Rs. 20,000 million
- Bids Received: Rs. 35,000 million
- Amount Accepted: Rs. 20,000 million
- Weighted Average Yield: 9.19%
- Accepted Rate Range: 9.18% (Minimum) to 9.19% (Maximum)
The long-term repo auction, set to mature on October 1, 2026, was significantly oversubscribed, with bids of Rs. 35,000 million against an offer of Rs. 20,000 million. This indicates a healthy demand for liquidity over a 30-day period, reflecting market participants’ longer-term funding requirements and perhaps expectations regarding future interest rate movements. The weighted average yield for this tenor was 9.19%, slightly higher than the shorter-term auctions, as expected.
Standing Facility Usage and CBSL Holdings
Financial institutions also utilized the CBSL’s Standing Facilities. The Standing Deposit Facility (SDF) saw Rs. 82,770 million deposited, indicating surplus liquidity held by some banks with the CBSL. Conversely, the Standing Lending Facility (SLF) was accessed for a modest Rs. 442 million, suggesting that overall systemic liquidity was generally comfortable, with only a limited need for emergency funding from the central bank.
In terms of its balance sheet, the CBSL’s holdings of Treasury Bills and Bonds stood at a face value of Rs. 2,492,619.35 million, with a book value of Rs. 1,538,640.14 million. These holdings are integral to the central bank’s monetary operations and overall management of the nation’s financial system.
Implications for the Economy
Today’s OMO results provide a snapshot of liquidity conditions and the CBSL’s active role in guiding monetary policy. The blend of oversubscription in overnight and long-term repos, alongside undersubscription in the short-term segment and the healthy use of the SDF, points to a nuanced liquidity landscape. The CBSL continues to strategically deploy its tools to ensure adequate liquidity for economic activities while diligently working towards its mandate of maintaining price stability and fostering a robust financial environment in Sri Lanka.
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