FE REPORT
The yields on two-year treasury bonds fell on Tuesday as the central bank purchased US$223.50 million more from 14 banks in a bid to stabilise the exchange rate of the US dollar against the local currency.
The cut-off yield, generally known as interest rate, on the Bangladesh Government Treasury Bonds (BGTBs) came down to 10.51 per cent on the day from 10.72 per cent earlier, according to auction results.
"Most banks are parking excess liquidity in the risk-free securities as private sector credit demand remains weak ahead of the upcoming national polls," a senior Bangladesh Bank (BB) official told The Financial Express (FE), citing political uncertainty and cautious lending sentiment.
He also said higher remittance inflows, alongside the central bank's purchases of US dollars, have helped boost market liquidity, contributing to the easing of yields on government securities.
On the day, the government raised Tk 35 billion through the issuance of BGTBs to partially finance its budget deficit.
Besides, the government borrowed Tk 5.0 billion on the same day through issuing Three-Year Floating Rate Treasury Bonds (FRTBs).
The cut-off yield on the FRTB also fell to 10.67 per cent on the day from 11.08 per cent earlier.
The FRTB is a bond whose coupon is determined by adding spread with benchmark 91 days Bangladesh Compounded Rate (BCR).
As part of its ongoing open market operations, the central bank on Tuesday purchased an additional US$223.50 million from 14 banks through an interbank spot market auction to help stabilise the exchange rate of the US dollar against the BDT.
The amount was bought under the Multiple Price Auction method and the cutoff rate was Tk 122.30 per dollar, according to the central bank officials.
The central bank of Bangladesh has so far bought $3.55 billion from banks directly since July 13 last under the prevailing free-floating exchange rate arrangement, the BB data showed.
The BB is purchasing US dollars from scheduled banks to maintain exchange rate stability, a move that helps preserve export competitiveness and support sustained remittance inflows, according to central banker.
They also said the liquidity positions of several banks-including some under stress-have improved as they sold US dollars to the central bank.
siddique.islam@gmail.com
