T-bill yields slip below policy rate after 5 months

Yields on treasury bills fell below the central bank's policy rate on Sunday for the first time in more than five months, reflecting ample liquidity in the banking system and muted demand for private-sector credit.
Bankers said surplus funds, coupled with strong remittance inflows ahead of Eid-ul-Fitr, have encouraged lenders to park money in risk-free government securities, pushing yields lower.
The cut-off yield, commonly known as the interest rate, on 91-day treasury bills declined to 9.90 per cent from the previous 10.02 per cent, while the yield on 182-day bills fell to 9.98 per cent from 10.11 per cent.
The yield on 364-day treasury bills also dropped to 9.94 per cent from 10.07 per cent, according to the auction results. The Bangladesh Bank's policy rate, also known as the repo rate, currently stands at 10 per cent.
On the day, the government raised Tk 82.50 billion by issuing three types of T-bills to partially finance its budget deficit.
The last time T-bill yields fell below the policy rate was on 28 September last year, under similar liquidity conditions.
"Most banks are preferring to invest their excess funds in risk-free government securities due to subdued private sector credit demand amid lingering uncertainty following the just-concluded national election," a senior Bangladesh Bank official told The Financial Express, explaining the current market situation.
Private sector credit growth stood at 6.10 per cent year-on-year in December 2025, down from 6.58 per cent a month earlier, according to the central bank's latest data.
The official also said higher inflows of inward remittances have boosted market liquidity, putting downward pressure on T-bill yields.
The central bank has continued purchasing US dollars directly from banks to offset strong remittance inflows ahead of the Eid-ul-Fitr festival.
As part of its ongoing open market operations, the central bank has bought $5.47 billion from banks since 13 July last year under the prevailing free-floating exchange rate arrangement.

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