Yield on 5-yr BGTBs surges

The yield on five-year Bangladesh Government Treasury Bonds (BGTBs) rose significantly on Tuesday as banks have expressed their unwillingness to invest in the securities before the upcoming Eid festival.

The cut-off yield, commonly referred to as the interest rate, jumped to 11.50 per cent on the day from 10.47 per cent earlier, according to auction results.

"The demand for BGTBs has declined as most banks are focused on managing their funds efficiently ahead of the upcoming Eid-ul-Fitr," a senior official of the Bangladesh Bank (BB) told the Financial Express (FE). On the day, the government borrowed Tk 40 billion through issuing the BGTBs to partially meet its budget deficit.

Talking to the FE, a senior treasury official at a leading private commercial bank said the demand for the BGTBs may fall further following the phasing out of the 28-day repo facility. The central bank has decided to phase out the 28-day repo facility from April 03. "The ongoing upward trend in BGTB yields may continue in the coming months," the treasury official predicts.

Earlier on March 04, the yield on two-year BGTBs increased significantly for the same reason. It rose to 11.20 per cent from 10.92 per cent earlier. Currently, five types of government bonds, with tenures of two, five, 10, 15 and 20 years, are traded on the market.

Besides, four treasury bills (T-bills) are auctioned to adjust government borrowing from the banking system. These T-bills have maturity periods of 14 days, 91 days, 182 days, and 364 days.

siddique.islam@gmail.com