The government opted for costlier borrowing with increased interest rates on its securities as banks were least interested to buy the instruments ahead of Eid.
Such borrowing through auction of different tools is meant for financing government budget deficit, and a slowdown in their sale prompted the government to put higher baits.
Yield, generally known as interest, on both Bangladesh Government Treasury Bonds (BGTB) and treasury bills (T-bills) showed upward trend this week following resumption of auctions after a month's suspension.
The government borrowed Tk 35 billion through issuing 91-Day T-bills, 182- Day T-bills and 02-Year BGTB in the current week as per action calendar, according to officials.
A total of Tk 170 billion will be borrowed from the market in June while net borrowing will stand at Tk 135 billion after making payments against maturity of the T-bills and bonds, they said.
The officials also said the government is set to borrow from the country's banking system during the period under review to finance its budget deficit partly.
As per the auction calendar, the government borrowed Tk 10 billion through issuing the 02-year BGTB at an auction held at the central bank headquarters in Dhaka on Monday.
The interest rate on the 02-year BGTB rose to 5.05 per cent Tuesday from 4.44 per cent of the previous auction held on March 01 last, according to auction results.
"Most of the commercial banks are not interested to invest their excess funds in the longer-tenure government securities to avert any possible liquidity pressure before the upcoming Eid-ul-Fitr festival," a senior treasury official of a leading private commercial bank (PCB) explained.
The cash-withdrawal pressure from the banks normally increases before Eid for catering growing demand for money, according to the banker.
"We expect that the yields on both BGTB and T-bills will increase by the end of this month," the private banker said.
On the other hand, the interest rate on 91-day T-bills rose to 3.38 per cent on June 04 from 2.87 per cent of the previous auction held on April 30 last while the yield on 182 -day T-bills reached 4.25 per cent from 3.14 per cent of the previous auction.
Currently, three T-bills are transacted on auction to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years respectively are traded on the money market.
When contacted, a senior official of the Bangladesh Bank (BB) said the central bank is watching the overall market closely to avoid any unwanted situation amid the Eid rush.
"We may use our monetary instruments to keep money market stable, if necessary," the central banker hinted.
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