The yield on two-year Bangladesh Government Treasury Bonds (BGTBs) dropped further on Tuesday as banks expressed willingness to invest their excess liquidity in the risk-free securities.
The cut off yield, generally known as interest rate, on the BGTBs came down to 10.17 per cent on the day from 10.24 per cent earlier, according to auction results.
However, the government borrowed Tk 25 billion through issuing the BGTBs on the day to meet its budget deficit partially.
"With liquidity inflows gradually increasing in the market, some banks have shown interest in investing their excess funds in government securities," a senior official of a leading private commercial bank (PCB) told The Financial Express (FE) while explaining the latest market
situation.
He also that said the banks prefer to park their excess liquidity in the risk-free treasury bonds because of lower credit demand from the private sector ahead of the general election.
The private banker predicted that the existing trend of yields on the government securities may continue in the coming weeks.
Besides, the government borrowed Tk 5.0 billion on the same day through issuing Three-Year Floating Rate Treasury Bonds (FRTBs).
The cut off yield on the FRTB also fell to 11.75 per cent on the day from 12.39 per cent earlier.
The FRTB is a bond whose coupon is determined by adding spread with benchmark 91 days Bangladesh Compounded Rate (BCR).
The BCR is a daily rate based on the cut-off yield of 91-Day Treasury Bills (T-bills) auction. This is a reference rate which is primarily used to set the rate of floating rate instruments of the government.
Currently, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
Besides, four treasury bills (T-bills) are transacted through auction to adjust government borrowings from the banking system.
The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
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