Written by The Banking Post
The yield on Bangladesh’s 10-Year Government Treasury Bonds (BGTBs) nosedived by an unprecedented 187 basis points on Tuesday, settling at 10.48% from 12.35%—the steepest single-day drop in recent memory. The fall highlights a growing anomaly in the fixed income market as liquidity-heavy banks rush to secure risk-free returns amid sluggish private sector credit demand.
Market insiders attribute the collapse in yields to aggressive bidding by commercial banks aiming to mitigate valuation losses on their bond holdings. While the strategy has short-term accounting benefits, treasury officials warn it may undermine secondary market development.
“This is not a healthy signal for fixed income investors,” cautioned a senior treasury official at a leading private bank. “If this trend continues, it could disincentivize individual and corporate participation in government securities.”
Conversely, central bank representatives describe the plunge as a temporary adjustment. A senior Bangladesh Bank (BB) official noted that banks are responding to weakened credit appetite—private sector credit growth fell to 7.17% in May from 7.50% in April—by reallocating excess liquidity to safe assets.
Despite soft yields, the government successfully raised Tk 30 billion through the auction to support its budget deficit, underscoring persistent institutional demand.
Bond market observers expect the downward pressure on yields to linger, especially in long-tenure securities. The latest developments follow a similar trend in treasury bills (T-bills), where yields fell below the 11% threshold just days earlier. On July 20, the cut-off yield on the 91-Day T-bill dropped to 10.45% from 11.58%, while the 182-Day and 364-Day tenors also declined significantly.
Currently, five categories of government bonds—ranging from 2 to 20 years—and four types of T-bills are actively traded through auctions, forming the backbone of domestic debt financing.
