What are Government Securities?
Government securities are debt instruments. The Government of Sri Lanka issues them. The Central Bank of Sri Lanka helps with this. These securities help finance state needs. They offer stable returns to investors.
Treasury Bills are short-term securities. They have tenors of 91, 182, or 364 days. The government issues them at a discount. You get the full face value at maturity. T-Bills are good for short-term liquidity needs.
Treasury Bonds are medium or long-term. Their maturities range from 2 to 30 years. Bonds pay coupon interest semi-annually. The principal amount repays at maturity. T-Bonds suit longer investment horizons.
G-Secs carry no default risk. The Sri Lankan sovereign backs these instruments. They serve as collateral for loans. They help set short-term interest rates. G-Secs also act as money market tools.
Who Provides G-Sec Services?
Primary Dealers offer G-Sec services. The Central Bank licenses these dealers. Licensed Commercial Banks can be Primary Dealers. Specific Primary Dealer Companies also exist. They help investors access auctions.
Many institutions provide G-Sec services. You can invest through state banks. Private banks also offer these services. Non-bank Primary Dealers are another option. They guide you through the investment process.
| Category | Institution Examples |
|---|---|
| State Banks | Bank of Ceylon; Peoples Bank; National Savings Bank |
| Private Banks | Commercial Bank of Ceylon; Seylan Bank; Nations Trust Bank; Cargills Bank |
| Non-Bank PDs | First Capital Treasuries PLC; Perpetual Treasuries; Capital Alliance PLC |
These dealers facilitate your investment. They help open your securities account. They also submit your bids in auctions. Choose a provider based on their service. Compare their fees before deciding.
How to Invest in G-Secs
Many people can invest in G-Secs. Sri Lankan residents are eligible. Non-resident citizens can also invest. Foreign individuals may buy securities. Local and foreign companies can invest too.
Companies need a board resolution. Mutual funds can also participate. Country or regional funds are welcome. Executors and receivers may also apply. You must meet specific eligibility criteria.
First, open a securities account. You must open this in LankaSecure. A licensed dealer will help you. They will guide you through the process. This account holds your securities electronically.
Minimum investment for T-Bills is LKR 10,000. You can invest in multiples of LKR 10,000. For T-Bonds, the minimum is LKR 1,000,000. You also invest in multiples of LKR 1,000,000. Check with your dealer for exact figures.
You submit bids through your dealer. T-Bills auctions happen weekly. T-Bonds auctions are monthly or quarterly. Your dealer places your bid for you. Ensure you submit bids on time.
Settlement happens on auction day. You pay the investment value. Securities are then credited. They appear in your LankaSecure account. This completes your purchase process.
At T-Bill maturity, face value repays. For T-Bonds, coupons pay on schedule. The principal amount repays at bond maturity. Funds are credited to your bank account. Your dealer will notify you of payments.
Understanding G-Sec Yields and Fees
Prevailing T-Bill yields vary. A 91-day T-Bill yields 7.85%. A 182-day T-Bill yields 8.10%. The 364-day T-Bill offers 8.60%. These figures are from July 2025 data.
T-Bond yields also differ by tenor. A 2-year bond yields 9.80%. A 5-year bond yields 10.90%. The 10-year bond offers 11.25%. These are indicative market quotes.
The Central Bank charges no auction fee. Dealers charge their own commission. This commission varies by provider. It typically ranges from 0.01% to 0.05%. This is based on your investment value.
Secondary market trades also have fees. Transaction fees are 0.01% to 0.05%. This fee is on the trade value. Always confirm fees with your chosen dealer. Understand all charges before trading.
G-Secs are scripless instruments. They settle via LankaSecure system. This means no physical certificates exist. All records are held electronically. This makes trading more efficient.
G-Secs are accepted as collateral. The Central Bank uses them in repo operations. This adds to their liquidity. Interest income is tax exempt. Capital gains are also exempt from withholding tax.
Important Benefits and Risks
Government securities offer major benefits. They have a sovereign guarantee. This means virtually zero credit risk. Your investment is very safe. The government stands behind these instruments.
G-Secs provide good liquidity. They have an active secondary market. You can sell them before maturity. They are also repo-eligible. This helps if you need cash quickly.
G-Sec yields benchmark other rates. The yield curve guides market lending rates. This provides transparency. The tax efficiency is also important. Interest and capital gains are exempt from tax.
However, G-Secs have risks. Interest-rate risk affects bonds. Bond prices fall if market rates rise. This can impact your portfolio value. Be aware of market rate movements.
Inflation risk is another concern. High inflation can erode real returns. Your purchasing power might decrease. Longer-dated bonds face liquidity risk. They are less liquid than short-term bills.
Consider laddering your maturities. This helps manage reinvestment risk. Monitor Central Bank policy rates. Watch general macroeconomic trends. Use repo facilities for short-term needs.
Tips for Investing in G-Secs
Diversify across different tenors. This balances liquidity needs. It also helps achieve higher long-term yields. Do not put all your funds into one maturity. A mix provides better portfolio stability.
Monitor auction calendars closely. Plan your cash flows around key dates. This helps you participate in new issuances. Your dealer can provide this information. Stay updated on upcoming auctions.
Leverage the secondary market. You can acquire better yields there. Or exit positions before maturity. This is useful if market rates change. Your dealer can assist with secondary trades.
Stay informed about market changes. Regularly review Central Bank releases. Read research notes from Primary Dealers. Pay attention to macroeconomic indicators. Knowledge helps you make better decisions.
Use a laddering strategy. Stagger your maturity dates. This reduces reinvestment risk. It also helps manage interest-rate risk. A laddered portfolio provides regular income.
If notices are delayed, update contact details. Ask for real-time dealer portal access. If funds are insufficient, pre-fund your account. Set up standing instructions with your bank. This avoids auction rejections.
For technical bidding issues, use alternate channels. Email or fax bids before cut-off. Maintain backup internet connectivity. If you need liquidity, sell in the secondary market. Use repo facilities via your dealer.
Regulatory changes can impact strategy. Engage with your dealer advisors. Subscribe to Central Bank circulars. Also follow SEC circulars for updates. Staying informed protects your investments.