BB prefers 30-day bill than REPO to swab excess fund

The central bank now prefers its 30-day bill than reverse REPO (repurchase agreement) for mopping up excess liquidity from the market, officials said.
Under the move, the Bangladesh Bank (BB) withdrew Tk 36.45 billion from the market using its 30-day bills on Monday, while reverse REPO bids worth Tk 30.85 billion were not accepted.
However, the rate of weighted average yield of the accepted bids rose to 4.19 per cent on the day from 3.39 per cent of the previous action on November 9, according to the auction results.
"We're now mopping up excess fund from the market using our 30-day bill due to lower yield and higher tenor than reverse REPO," a BB senior official told the FE.
He also said the central bank accepted 28 bids worth Tk 36.45 billion on the day against 37 bills worth Tk 45.20 billion.
"We're using different monetary instruments in line with our monetary programme," he added.
Talking to the FE, another BB official said the central bank is now trying to give a message to banks and non-banking financial institutions (NBFIs) to find out new avenues for investment.
"We're advising the banks and NBFIs to boost their investment in productive sectors by slashing interest rates on lending," the central banker explained.
Market operators expect that the inter-bank call money rate, which is hovering between 2.50 per cent and 4.50 per cent, may move upward in the coming days following rising trend of yield on 30-day Bangladesh Bank Bills.
"We also hope that the yield on treasury bills (T-bills) may go up from the next auction," a senior treasury official of a leading private commercial bank told the FE.
He also said the central bank earlier used the bills for purchasing the US dollar from the banks directly to keep reserve money within its monetary progarmme.
BB has already mopped up Tk 174.30 billion from the market through four auctions of its 30-day bills from October 26 to November 16, according to the official figures.
"We've resumed the auction of 30-day bills on October 26 to mop up surplus liquidity from the market," another BB official explained.
The central bank reintroduced 30-day and 91-day Bangladesh Bank Bills in October 2006 as monetary policy instruments, following a decision that the T-bills and bond auctions would be exclusively used for the government debt management.
However, the auction of 91-day Bangladesh Bank Bills was discontinued to avoid duplication with 91-day T-bills from January 8, 2008.
Meanwhile, the overall excess liquidity with the commercial banks stood at around Tk 1.15 trillion as of October 15. But major portion of the funds has been invested in the risk-free government securities, another BB official said.
He also said the excess reserve, generally known as excess over daily minimum cash reserve requirement (CRR) with the central bank, stood at around Tk 34 billion.
On the other hand, depreciating trend of the local currency against the US dollar continues until Monday mainly due to mismatch of liquidity by the commercial banks.
The US dollar was traded at Tk 78.55-78.62 in the inter-bank foreign exchange market on the day against Tk 78.54-78.55 of the previous working day. It was Tk 77.80 on October 26.
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