The yield on two-year Bangladesh Government Treasury Bonds (BGTBs) marked a sharp rise on Tuesday as banks showed reluctance to invest in the securities.
The cut off yield, generally known as interest rate, on the BGTBs rose to 12.18 per cent on the day from 11.20 per cent earlier, according to auction results.
The government borrowed Tk 45 billion through issuing the BGTBs on the day to partially meet its budget deficit.
"Most banks remain unwilling to invest their funds in BGTBs due to the ongoing liquidity pressure in the market," a senior treasury official of a leading private commercial bank (PCB) told the FE while explaining the latest market situation.
The treasury official also predicted that the ongoing upward trend of yields on BGTBs may continue in the coming weeks.
Besides, the government borrowed Tk 5.0 billion on the day through issuing Three-Year Floating Rate Treasury Bonds (FRTBs).
The cut off yield on the FRTB rose to 13.19 per cent on the day from 12.49 per cent earlier.
The FRTB is a bond whose coupon is determined by adding spread with benchmark 91 days Bangladesh Compounded Rate (BCR).
The BCR is a daily rate based on the cut-off yield of 91-Day Treasury Bills (T-bills) auction. This is a reference rate which is primarily used to set the rate of floating rate instruments of the government.
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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