Vajira Kulatilaka chief executive of NDB Capital Holdings said investors would be able to measure how fund managers are doing by measuring the index against their performance.
Fund managers would also be able to launch index based gilt funds, he said.
Sri Lanka's bond markets are opened to foreign investors. Foreign investors have mostly bought into gilts.
"We are confident that these indices will act as a catalyst in the development of our capital markets and attract more investments into government securities both from local and foreign investors," NDB group chairman Hemaka Amarasuriya said.Next year the listed corporate bond market is also expected to be more active after withholding taxes were lifted from 2013, he said.
CRISIL which is already providing of indices in India has managed to overcome obstacles seen in newly developing markets to build useful indices, Kulatilaka said.
Mukesh Agarwal, president CRISIL Research said his firm was the largest provider of fixed income valuations which has allowed them to develop fixed income securities indices.
He said in India some debt securities were not frequently traded like in Sri Lanka and CRISIL provided valuation for fund managers to mark-to-market investments.
Agarwal said the index can be used to launch passive exchange traded funds or to develop derivative products.
They will be total return indices, which captures to price of the bond and interest accrual.