The bond issue was arranged by HSBC, Barclays, and JPMorgan and co-managed by the Bank of Ceylon.
In the equity markets, the All Share index closed one point lower at 2,615.
42 and the Milanka index lost seven points to close lower at 3,533.11.
over 880,000 Ceylon Leather Products shares changed hands which closed one rupee lower at 69.75.
Touchwood shares closed up 2.50 rupees at 141.50 and Lanka Orix was also up 2.50 to close at 153.
Dialog Telekom closed flat at 23.
75 rupees while Sri Lanka Telecom closed up 25 cents at 34.25 rupees.
John Keells Holdings slipped one rupee to close at 129.
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Total turnover was 329 million rupees. Analysts said the drop in rates could have a positive impact on the stock market if it prompts investors to shift their funds from debt to equity
The three-month Treasury bill yield was down 102 basis points to 17.23 percent at the Central Bank's weekly auction on Tuesday October 23, the bank's debt office said in a statement.
Yields on bills with longer maturities also eased as the government's borrowing requirements were seen as being satisfied for the time being.
Six month yields fell to 17.36 percent from 17.54 percent at the previous auction while yield on one year bills came down to 17.
16 percent from 17.39 percent.
"The sharp drop in three-month treasury bill yields at yesterday's T Bill auction could provide a boost to equities if it is sustained and if market rates also adjust lower," said Channa Amaratunga, Chief Investment Officer of Boston Capital, a boutique investment house.
Other analysts agreed lower interest rates could be good for the stock market but noted that market sentiment would depend on how wisely the funds from the bond issue would be used by the government.
Geeth Balasuriya, assistant manager research of HNB Stockbrokers, said falling interest rates could prompt a shift of investor funds from debt to equities.
But he said it was important for the government to use the fresh funds for productive purposes such as infrastructure and not on consumption.
The Central Bank said its dollar bond issue at a yield of 8.25 percent was over-subscribed and would help private companies to also tap funds from international markets.