Abstract
This paper develops an index to measure the overall performance of the Sri Lankan Treasury bond market. The index, named as the Sri Lanka Treasury Bond Index, is value-weighted, assumes monthly portfolio rebalancing, and takes into account capital appreciation as well as income components of bond returns. It includes all the outstanding Treasury bonds having a remaining maturity of more than one year. This index represents the performance of the risk-free benchmark portfolio, provides an indicator of the movements of aggregate long-term interest rates in the economy, and gives a standard for evaluation of the performance of managed portfolios