Rising demand for govt securities drives down interest rates
Monday, 13 April 2009
FE Report
The interest rates on Treasury Bills (T-bills) have fallen further because of the increasing demand for government-approved securities recently, treasury officials said.
The demand for such securities has sharply risen mainly due to lower interest rates on call money in the interbank market that has forced banks and financial institutions to invest in such securities.
The yield, generally known as interest rate, on 91-day T-bill fell to the range of 7.00-7.30 per cent Sunday from 7.70-7.80 per cent of the previous auction, held on April 5 last.
Besides, the yield on 182-day T-bill came down to 7.90- 8.09 per cent from 8.16 per cent of the previous auction, held on March 29 last.
"Most of the banks are now interested to invest their excess liquidity in the government-approved securities for more gain because of the low interest rates on call money in the interbank market," a treasury official of a private commercial bank told the FE Sunday.
The call money rate mainly ranged between 0.25 per cent and 10 per cent on the day against Thursday's range between 0.20 per cent and 10 per cent. But most of the deals were settled at rates between 0.50 per cent and 1.00 per cent on the day.
Two weeks back, the call money rate dropped sharply mainly due to a sluggish demand for fund in a highly-liquid market.
Non-acceptance of reverse repurchase agreement (repo) by the central bank since March 25 last also contributed to the decline in call rate, market operators said.
The overall excess liquidity with the commercial banks, a record Tk 215 billion in February last, grew by 65 per cent from that of the corresponding period of the previous year. The figure was Tk 130 billion in February last year, according to the latest estimation.
A consistent decline in the call rate in the interbank money marker point to a poor investment situation in the backdrop of the current global recession, experts noted.
"We're giving a signal to the commercial banks to expand their credit to the productive sectors at a lower interest rate," a senior official of the Bangladesh Bank told the FE while explaining the main reason behind the falling interest rates on securities.
Currently, three T-bills are being transacted through auctions to adjust the government borrowings from the banking system.
The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, four government bonds - 5-year, 10-year, 15-year and 20-year -are being traded in the markets.
The interest rates on Treasury Bills (T-bills) have fallen further because of the increasing demand for government-approved securities recently, treasury officials said.
The demand for such securities has sharply risen mainly due to lower interest rates on call money in the interbank market that has forced banks and financial institutions to invest in such securities.
The yield, generally known as interest rate, on 91-day T-bill fell to the range of 7.00-7.30 per cent Sunday from 7.70-7.80 per cent of the previous auction, held on April 5 last.
Besides, the yield on 182-day T-bill came down to 7.90- 8.09 per cent from 8.16 per cent of the previous auction, held on March 29 last.
"Most of the banks are now interested to invest their excess liquidity in the government-approved securities for more gain because of the low interest rates on call money in the interbank market," a treasury official of a private commercial bank told the FE Sunday.
The call money rate mainly ranged between 0.25 per cent and 10 per cent on the day against Thursday's range between 0.20 per cent and 10 per cent. But most of the deals were settled at rates between 0.50 per cent and 1.00 per cent on the day.
Two weeks back, the call money rate dropped sharply mainly due to a sluggish demand for fund in a highly-liquid market.
Non-acceptance of reverse repurchase agreement (repo) by the central bank since March 25 last also contributed to the decline in call rate, market operators said.
The overall excess liquidity with the commercial banks, a record Tk 215 billion in February last, grew by 65 per cent from that of the corresponding period of the previous year. The figure was Tk 130 billion in February last year, according to the latest estimation.
A consistent decline in the call rate in the interbank money marker point to a poor investment situation in the backdrop of the current global recession, experts noted.
"We're giving a signal to the commercial banks to expand their credit to the productive sectors at a lower interest rate," a senior official of the Bangladesh Bank told the FE while explaining the main reason behind the falling interest rates on securities.
Currently, three T-bills are being transacted through auctions to adjust the government borrowings from the banking system.
The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, four government bonds - 5-year, 10-year, 15-year and 20-year -are being traded in the markets.