The yield on 10-year Bangladesh Government Treasury Bonds (BGTBs) crossed 12 per cent on Tuesday, as banks showed reluctance to invest in the securities ahead of the upcoming Eid festival.
The cut-off yield, generally known as interest rate, on the BGTBs rose to 12.05 per cent on the day from 10.32 per cent earlier, according to auction results.
"The demand for long-term treasury bonds has decreased as most banks are now focused on managing their funds efficiently ahead of the Eid-ul-Fitr festival," a senior official of the Bangladesh Bank (BB) told The Financial Express (FE) while explaining the upward trend of yield on BGTBs.
He also said the government's demand for funds has increased as its employees' salaries and Eid bonuses are scheduled to be disbursed on March 23.
The finance ministry has already announced that all officials and employees working at all government, semi-government and autonomous institutions, and members of the armed forces will receive their salaries for March along with Eid bonus on March 23.
The government borrowed Tk 40 billion through issuing the BGTBs on the day to partially meet its budget deficit.
Talking to the FE, head of treasury at a leading private commercial bank (PCB) said most of the banks are maintaining a cautious approach in investing their excess funds in long-term securities, considering the future liquidity situation in the market.
The interest rates on the government-approved securities are not factored at this moment, he said, adding that factor is the future liquidity situation in the market. "Liquidity support from the central bank is set to squeeze after phasing out the 28-day tenure repo facility from April 03 this calendar year," the private banker explained.
He also predicted that the ongoing upward trend of yield on BGTBs may continue in the coming months.
Earlier on March 11, the yield on Five-Year BGTBs increased significantly on the same ground.
The cut-off yield on the BGTBs rose to 11.50 per cent on the day from 10.47 per cent earlier.
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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