The yields on treasury bills (T-bills) increased significantly on Sunday as banks showed reluctance to invest their excess liquidity in the securities ahead of the upcoming Eid-ul-Fitr.
The cut off yield, generally known as interest rate, on the 91-Day T-bills rose to 10.75 per cent from 10.35 per cent of the previous level while the yield on 182-Day T-bills reached 10.90 per cent from 10.84 per cent from the earlier level.
However, the yield on 364-Day T-bills rose to 11.09 per cent on the day from 10.79 per cent earlier, according to the auction results.
"Most banks are now focused on managing their funds efficiently before and after the Eid rather than investing in government securities," a senior official of the Bangladesh Bank (BB) told The Financial Express (FE) while explaining the upward trend in T-bill yields.
He also said that T-bill yields are unlikely to decline before the festival.
The government borrowed Tk 70 billion on the day through issuing three types of T-bills to partially meet its budget deficit.
"The rise in T-bill yields may continue in the coming months as liquidity support from the central bank through the repo facility is set to tighten after the Eid holidays," head of treasury at a leading private commercial bank (PCB) told the FE.
The central bank has already decided to phase out the 28-day tenure repo facility from April 03, 2025.
The private banker also predicted that the government borrowing from the banking system will normally increase during the last two months - May and June - of the current fiscal year.
Currently, four 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.
The bills are short-term investment tools issued through auction, conducted by the central bank on behalf of the government.
Earlier on March 11 this calendar year, the yield on Five-Year Bangladesh Government Treasury Bonds (BGTBs) jumped 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, according to auction results.
Furthermore, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
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