Written by The Banking Post
The yield on Bangladesh Government Treasury Bonds (BGTBs) fell further on Tuesday as banks, flush with liquidity, opted to invest in risk-free government securities amid subdued private sector credit demand.
According to auction results, the cut-off yield on two-year BGTBs declined to 10.17%, down from 10.24% in the previous auction. The government raised Tk 25 billion from the bond issuance to help finance its budget deficit.
“With liquidity inflows rising, some banks are showing interest in placing excess funds in government securities,” a senior official of a leading private commercial bank said. “Ahead of the general election, private credit demand is slow, so banks prefer safe treasury bonds.”
The official noted that yields on government securities may continue to soften in the coming weeks if the current trend persists.
On the same day, the government also borrowed Tk 5 billion through three-year Floating Rate Treasury Bonds (FRTBs). The cut-off yield on the FRTB dropped to 11.75% from 12.39% earlier.
The coupon rate of FRTBs is set by adding a spread to the 91-day Bangladesh Compounded Rate (BCR), a benchmark derived from treasury bill auctions.
Currently, the market trades five fixed-tenure government bonds (2, 5, 10, 15, and 20 years) and four treasury bills with maturities of 14, 91, 182, and 364 days.
