T-bill yields mixed as banks turn cautious

The yields on treasury bills (T-bills) showed a mixed trend on Sunday as banks opted to place their excess liquidity in shorter-tenure securities rather than longer-dated ones, amid uncertainty ahead of the national polls.

According to auction results, the cut-off yield, generally regarded as the interest rate, on the 91-day T-bills fell marginally to 10.11 per cent from 10.14 per cent at the previous auction.

In contrast, yields on longer-tenure T-bills moved up.

The cut-off yield on the 182-day T-bills rose to 10.45 per cent from 10.25 per cent, while the yield on the 364-day T-bills increased to 10.39 per cent from 10.34 per cent earlier.

The government raised Tk 80 billion on the day by issuing the three categories of T-bills to partly finance its budget deficit.

"Most banks are reluctant to park their excess funds in longer-term T-bills to manage liquidity more efficiently ahead of the upcoming national election," a senior treasury official at a leading private commercial bank told The Financial Express.

He added that banks are instead favouring short-term T-bills to avoid potential interest rate volatility in the pre-election period. The banker also expected the current yield pattern in government securities to persist over the coming weeks.

At present, four types of T-bills are issued through auctions to manage government borrowing from the banking system. These include bills with maturities of 14 days, 91 days, 182 days and 364 days.

In addition, five government bonds with tenures of two, five, 10, 15 and 20 years are actively traded in the market.

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