The yield on five-year treasury bonds rose significantly on Tuesday as banks were reluctant to invest surplus funds in government securities, aiming to manage their portfolios more cautiously ahead of the national election.
The cut-off yield, generally known as interest rate, on the Bangladesh Government Treasury Bonds (BGTBs), soared to 10.15 per cent on the day from 9.34 per cent earlier, according to auction results.
However, the government borrowed Tk 30 billion on the day through issuing the BGTBs to help meet its budget deficit partially.
"Most banks are managing their funds cautiously to avoid any unexpected situation surrounding the upcoming national election," a senior treasury official at a leading private commercial bank (PCB) told The Financial Express (FE) while explaining the latest market situation.
He further said the banks were reluctant to park their excess funds in the government securities ahead of the year-end closing on December 31.
The private banker also predicted that the existing uptrend in the yield on the government securities may persist in the coming weeks.
At present, five government bonds, having tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
Besides, four treasury bills (T-bills) are also 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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