Government Securities Market

Treasury-Bill Market

The Treasury bill market is another segment of the Money Market. Treasury bills are highly liquid money market instruments that provide financial institutions with an alternate source of liquidity and investment. Furthermore, interest rate movements in the Treasury bill market provide a benchmark for the short-term credit market. Hence, changes in the volumes and rates in the Treasury bill market affect the cost, profitability and liquidity of financial institutions. Treasury bills are also the main securities used as collateral by the Central Bank in the conduct of its open market operations.


Treasury-Bond Market

Treasury Bond is a medium and long term debt instrument issued by the Government of Sri Lanka under the Registered Stock and Securities Ordinance No. 7 of 1937 (as amended) when it raises domestic public debt for budgetary purposes. 

As an Agent of the Government of Sri Lanka, the Public Debt Department of the Central Bank of Sri Lanka (CBSL) issues the Treasury bonds, pays interest on due dates and repays the principal on maturity.  

In terms of annual borrowing targets specified in the Appropriation Act which is approved by the Parliament annually, the Government of Sri Lanka is authorized to issue Treasury bonds.


The Main Features of Treasury Bonds

   Risk free, gilt edged debt instrument

   Maturities are available with 2-20 years

   It carries half yearly coupon payments and the principal is repaid  on maturity 

   Yield rates are determined by the market

   Tradable instrument in the secondary market

   Issued in scripless form 


Benefits Derived by Investing in Treasury Bonds

   It is an absolutely risk free investment, since it is issued by the sovereign government.  
      Hence, they are called gilt-edged securities meaning that  they are covered by gold.

   It is possible to get the highest rate of interest since the yield rates are determined in the market.

   Since these bonds are tradable in the secondary market, it is possible to obtain instant liquidity by selling them in the market.

   All receipts of interest and maturity proceeds are fully repatriable.

   It is possible to have a joint investment with some other person or persons.  

   Not subject to further taxation, since a withholding tax of 10 percent is charged at source.

   No stamp duty is payable on these bonds.

   The CBSL which maintains these investments in state of the art Scripless Security Settlement System and the fully automated Central Depository System (CDS).


Applying for Treasury Bonds

Treasury bonds can be purchased at any time through Primary Dealers (PDs) or Licensed Commercial Banks (LCBs) registered with the CBSL. PDs are the institutions appointed by the CBSL for trading in Government securities.  

Treasury bonds can be purchased from the secondary market or by bidding in the primary auctions through PDs.

For the purpose of fund transfers, a Rupee account named “Treasury bond Investment External Rupee Account (TIERA)” can be opened in an LCB in Sri Lanka.

Security account in the CDS maintained by CBSL will be opened by the LCB/PD after the completion of the transaction.


Availability of Treasury Bonds

Foreign investors can purchase up to 10 % of the total outstanding Treasury bonds at any given time. Eg. As at November 30, 2007, Treasury bond outstanding stock was Rs. 1053 bn. Accordingly, Rs. 105.3 bn.  is available for foreign investors. Eligible foreign investors are permitted to purchase, sell or transfer Treasury bonds with any maturity period. 

Interest and maturity proceeds relating to Treasury bonds are credited on due dates directly to the investor's account through LCB/PD who are responsible to pay dues on due dates.  


Obtaining information on Treasury Bonds

   Details on available Treasury bonds and prevailing market rates can be obtained from LCBs, PDs and CBSL Website (www/ 

   Details on current auctions can be obtained from LCBs and PDs 

   Any detail on this scheme can be obtained from the Public Debt Department of the CBSL.


FAQ on Government Debt Securities