Auction of Tk 25b T-bond cancelled

The government's auction committee on Tuesday discarded the bidding of long-term government securities involving Tk 25 billion due to higher rates placed by the participating primary dealers (PDs).

The central bank arranges auctions of treasury bills and treasury bonds through which the government borrows funds from the banking system to meet its budget deficit.

Sources at the Bangladesh Bank said the government was supposed to borrow Tk 15 billion and Tk 10 billion from issuing treasury bonds of 15-year and 20-year terms that day.

But the PD banks, which are allowed to take part in the auction, placed the starting interest rate of 9.25 per cent, which is much higher than that of the previous auction's cut-off yield of 8.65 per cent and 8.80 per cent respectively.

Seeking anonymity, a central banker said the higher rate placed by the PDs prompted the auction committee to abandon the day's bidding as the government having adequate funds does not have urgency of credit.

"The government probably thinks the payment of higher rates for a longer period of time won't be viable for them. That's why, the bidding was discarded," he added.

According to another official, the government has been receiving a sizeable volume of funds from banks through issuing short- and mid-term government securities.

On the other hand, he said, the central bank approved its balance sheet on Tuesday, meaning that the government would get more funds from the profits earned by the BB.

The auction for long-term government securities normally takes place once in a month.

In the previous two months (June and July), the bidding of those investment instruments were also discarded on the same ground.

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