Written by The Banking Post
The yield on Bangladesh’s two-year treasury bonds slipped below the central bank’s policy rate on Tuesday, as banks continued parking surplus liquidity in government securities amid sluggish private credit demand ahead of the national election.
According to auction results, the yield on Bangladesh Government Treasury Bonds (BGTBs) dropped to 9.44%, down from 10.17%, while the Bangladesh Bank’s policy (repo) rate stands at 10%.
The development signals cautious market sentiment and a low appetite for private lending, as financial institutions favour low-risk investments over riskier loans.
A similar decline was recorded on September 2, when the yield fell to 10.17% from 10.24%, continuing the downward trend driven by banks’ preference for government securities.
On Tuesday, the government mobilised Tk 35 billion through BGTB issuance to help finance its budget deficit.
“Most banks prefer to invest their excess funds in government-approved securities due to weak private credit demand ahead of the election,” a senior Bangladesh Bank official said, explaining the market behaviour.
Private sector credit growth remains subdued, inching up slightly to 6.52% year-on-year in July 2025, compared to 6.49% in June, reflecting lingering business uncertainty and tight lending conditions.
