Banks' race for govt bonds drives down interest rate
Friday, 28 August 2009
FE Report
The interest rate on Bangladesh Government Treasury Bonds (BGTB) dropped further Tuesday as commercial banks rushed to offer their bids in auction, treasury officials said.
The yield, generally known as coupon interest rate, on the 20-year BGTB fell to 8.59 per cent on the day from 8.97 per cent of the previous auction, held on July 28 last.
"Some commercial banks have quoted lower interest rates on investment of their excess liquidity in the government-approved securities as they have shifted their focus on the government bonds from interbank call money in a bid to minimise their cost of funds," a senior treasury official of a commercial bank told the FE.
The overall excess liquidity with the commercial banks stood at Tk 347 billion in June last, registering a growth of over 165 per cent compared to that of the corresponding period of the previous calendar year, according to the BB.
The demand for such securities has risen mainly due to the lower interest rates on call money in the interbank market, the treasury official added.
The call money rate ranged between 0.15 per cent and 3.50 per cent on the day, unchanged at the previous level. But most of the deals were made at rates between 0.15 per cent and 0.20 per cent on the day, market operators said.
Currently, four government bonds - 5-year, 10-year, 15-year and 20-year -are being traded in the markets.
The interest rate on Bangladesh Government Treasury Bonds (BGTB) dropped further Tuesday as commercial banks rushed to offer their bids in auction, treasury officials said.
The yield, generally known as coupon interest rate, on the 20-year BGTB fell to 8.59 per cent on the day from 8.97 per cent of the previous auction, held on July 28 last.
"Some commercial banks have quoted lower interest rates on investment of their excess liquidity in the government-approved securities as they have shifted their focus on the government bonds from interbank call money in a bid to minimise their cost of funds," a senior treasury official of a commercial bank told the FE.
The overall excess liquidity with the commercial banks stood at Tk 347 billion in June last, registering a growth of over 165 per cent compared to that of the corresponding period of the previous calendar year, according to the BB.
The demand for such securities has risen mainly due to the lower interest rates on call money in the interbank market, the treasury official added.
The call money rate ranged between 0.15 per cent and 3.50 per cent on the day, unchanged at the previous level. But most of the deals were made at rates between 0.15 per cent and 0.20 per cent on the day, market operators said.
Currently, four government bonds - 5-year, 10-year, 15-year and 20-year -are being traded in the markets.