Yields on 10-year government bonds rose sharply on Tuesday, reflecting subdued demand from banks that are increasingly favouring shorter-term instruments to manage liquidity and risk.
The shift comes amid higher government borrowing in the final quarter of the fiscal year, putting upward pressure on long-term interest rates and signalling tighter conditions in the debt market.
The cut-off yield, generally known as the interest rate, on Bangladesh Government Treasury Bonds (BGTBs) climbed to 10.98 per cent on the day from 10.26 per cent earlier, according to auction results.
"Most banks prefer to invest their excess liquidity in shorter-tenure government securities rather than long-term bonds," a senior treasury official at a leading private commercial bank told The Financial Express (FE), commenting on the current market scenario.
Comparatively higher government borrowing from banks for the final quarter of the current fiscal year (FY 2025-26) has also pushed up bond yields, the treasury official explained.
However, the government borrowed Tk 30 billion instead of the earlier planned Tk 20 billion through issuing BGTBs on the day to partially meet its budget deficit, according to the banker.
The banker also predicted that the current upward trend in yields on government securities may continue in the coming weeks.
At present, five government bonds, with tenures of two, five, 10, 15 and 20 years, are traded in the market.
In addition, four treasury bills (T-bills) are transacted through auctions to adjust government borrowings from the banking system.
The T-bills have maturity periods of 14 days, 91 days, 182 days and 364 days.
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