Yields on government treasury bonds surged on Tuesday as banks turned cautious, favouring short-term instruments over longer-tenure securities.
The shift reflects both liquidity management strategies and rising government borrowing needs toward the end of the fiscal year.
The development highlights growing pressure in the domestic debt market, where investor appetite for longer-term bonds remains subdued despite higher returns.
The cut-off yield, commonly referred to as the interest rate, on Bangladesh Government Treasury Bonds (BGTBs) rose to 10.23 per cent on the day from 9.74 per cent earlier, according to auction results.
"Most banks prefer to invest their excess liquidity in shorter-tenure government securities rather than bonds," a senior Bangladesh Bank (BB) official told The Financial Express (FE), commenting on the current market situation.
He added that relatively higher government borrowing from banks in the final quarter of the current fiscal year (FY2025-26) has also pushed up bond yields.
The government raised Tk 35 billion on the day, higher than the earlier plan of Tk 25 billion, through the issuance of BGTBs to partially finance its budget deficit, according to the central banker.
In addition, the government borrowed Tk 5.0 billion on the same day by issuing three-year Floating Rate Treasury Bonds (FRTBs).
The cut-off yield on the FRTB also increased to 10.60 per cent from 10.02 per cent earlier.
An FRTB is a bond whose coupon is determined by adding a spread to the benchmark 91-day Bangladesh Compounded Rate (BCR).
The BCR is a daily rate derived from the cut-off yield of 91-day Treasury bill (T-bill) auctions and serves as a reference rate for setting yields on government floating-rate instruments.
Currently, five government bonds with tenures of two, five, 10, 15 and 20 years are traded in the market.
In addition, four treasury bills (T-bills) are auctioned to manage government borrowings from the banking system, with maturity periods of 14 days, 91 days, 182 days and 364 days.
siddique.islam@gmail.com
