Sri Lanka: Perfectly priced

Research evidence excerpt

Sri Lanka: Perfectly priced

FICC Research

Credit & Macro Research

10 July 2026

Emerging Asia Sovereign Credit

Bonds have rallied and are pricing in the best outcome for the

MLBs. From here, it is largely a carry trade. Therefore we

suggest hold not chase. Within the curve, we prefer exposure Asia Credit Strategy

through the low-cash price bonds: buy SRILAN 33s (MLB)/ 35s Avanti+65 6308Save,3116CFA

avanti.save@barclays.com(GLBs). We also recommend a switch from SRILAN 36s to 33s

Barclays Bank, Singapore

Economics Research

Amruta Ghare

We appreciate your consideration in the 2026 Extel Global Fixed-Income Research +91 (0) 22 6719 6074

Survey in the Asia (ex-Japan): Sovereign Credit Strategy and Asia (ex-Japan) amruta.ghare@barclays.com

Economics categories. View our analysts » Vote 5 Stars for Barclays » BSIPL, India

Credit Strategy: Just carry

Avanti Save, CFA Barclays Bank, Singapore

Trade idea: Buy SRILAN 33s (MLB)/35s (GLB); Switch from SRILAN 36s to

33s

From a fundamental perspective, we are constructive on Sri Lanka (Overweight) because the

economy is on a strong footing: fiscal buffers (primary surplus in 2025) allowed targeted

subsidies to shield consumers from energy price hikes, with robust and sticky remittances and

strong tourism receipts. Furthermore, policy credibility is visible even during difficult periods:

CBSL's recent decision to hike the policy rate was guided by both inflation concerns and LKR

depreciation pressure.

Reflecting this upbeat backdrop, our model-implied yields on the MLBs suggest that the bonds

are pricing in a high likelihood of realizing the upper-upside threshold. Under this threshold, the

bonds are yielding 8.2%, 8.4%, 8.7% and 9% for the SRILAN 30s, 33s, 36s and 38s

respectively.