Yields on two-year treasury bonds saw a significant increase on Tuesday as banks displayed a reluctance to allocate their surplus funds into government securities for more effective portfolio management.
The cut-off yield, commonly referred to as the interest rate, on Bangladesh Government Treasury Bonds (BGTBs) climbed to 10.10 percent from a previous 9.44 percent, as indicated by auction results.
"Many banks are cautious about investing their excess liquidity in the bonds, as the amount of such funds has been steadily declining," a senior official from Bangladesh Bank (BB) remarked to The Financial Express, reflecting on the current market conditions.
He further noted that the government's relatively higher borrowing from banks for the second quarter of the fiscal year 2025-26 has contributed to the rise in yields on both treasury bills and bonds.
Nonetheless, the government secured Tk 40 billion instead of Tk 35 billion through the issuance of BGTBs on that day to partially address its budget deficit, according to the central banker. Furthermore, the government raised Tk 5.0 billion on the same day by issuing three-year Floating Rate Treasury Bonds (FRTBs).
The cut-off yield on the FRTB also increased to 10.95 percent from 10.70 percent previously.
The FRTB is a bond whose coupon rate is established by adding a spread to the benchmark 91-day Bangladesh Compounded Rate (BCR).
The BCR is a daily rate derived from the cut-off yield of the 91-day Treasury Bills (T-bills) auction. It acts as a reference rate primarily utilized to determine the rates of floating-rate instruments issued by the government.
At present, five government bonds with maturities of two, five, 10, 15, and 20 years are available for trading in the market.
Additionally, four Treasury Bills (T-bills) are auctioned to manage government borrowings from the banking sector. The T-bills have maturity periods of 14 days, 91 days, 182 days, and 364 days.
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