Yields on Bangladesh's 10-year Treasury bonds declined further on Tuesday as banks channelled surplus liquidity into government securities amid subdued private sector credit demand and improved market liquidity.
The cut-off yield, generally known as the interest rate, on Bangladesh Government Treasury Bonds (BGTBs) fell to 10.37 per cent on the day from 10.49 per cent earlier, according to auction results.
Earlier, on 20 January, the yield on 10-year BGTBs had dropped to 10.49 per cent from 10.87 per cent previously on the same grounds.
"Most banks prefer to invest their excess liquidity in government securities, as private sector credit demand remains weak due to political uncertainty following the recently concluded national polls," a senior official of Bangladesh Bank (BB) told The Financial Express (FE), explaining the latest market situation.
He added that higher remittance inflows, along with the central bank's purchases of US dollars, have improved market liquidity, putting downward pressure on yields on government securities.
On the day, the government raised Tk 20 billion through the issuance of BGTBs to partially finance its budget deficit.
Currently, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded in the market.
In addition, four treasury bills (T-bills) are auctioned to adjust government borrowings from the banking system.
The T-bills have maturity periods of 14 days, 91 days, 182 days and 364 days.
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