Two-year bond yield dips below BB policy rate

FE Team | Published: March 03, 2026 22:49:20

FE REPORT
The yield on two-year treasury bonds fell below the central bank's policy rate on Tuesday, as banks parked excess liquidity in government securities amid subdued private sector credit demand.
The cut off yield, generally known as interest rate, on the Bangladesh Government Treasury Bonds (BGTBs) came down to 9.74 per cent on the day from 10.46 per cent earlier, according to auction results.
Currently, the Bangladesh Bank's (BB) policy rate, also known as the repo rate, is 10 per cent.
Earlier on March 01 last, yields on tree-type of treasury bills (T-bills) fell below the BB's policy rate also on the same ground.
On the day, the government raised Tk 25 billion by issuing the BGTBs to partially finance its budget deficit.
"Most of the banks are opting to invest their excess funds in risk-free government securities, primarily due to subdued private sector credit demand amid lingering uncertainty following the just-concluded national election," a BB senior official told The Financial Express (FE).
The central bank expects a gradual rise in the private sector credit demand in the months ahead.
Meanwhile, the private sector credit growth stood at 6.10 per cent year-on-year in December 2025 from 6.58 per cent a month earlier, according to the central bank's latest figures.
The BB official also said higher inflows of inward remittances have helped boost liquidity, putting downward pressure on BGTBs yield.
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 10.02 per cent on the day from 10.58 per cent earlier.
The FRTB is a bond whose coupon is determined by adding spread with benchmark 91 days Bangladesh Compounded Rate (BCR).
The BCR is a daily rate based on the cut-off yield of 91-Day Treasury Bills (T-bills) auction. This is a reference rate which is primarily used to set the rate of floating rate instruments of the government.
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