Dhaka, Bangladesh (BBN)- The interest rate on Bangladesh Government Treasury Bonds (BGTB) dropped on Tuesday, as commercial banks rushed to offer bids in the auction, treasury officials said.
The yield, generally known as coupon interest rate, on 20-year BGTB fell to 8.5900 percent on the day from 8.9700 percent of the previous auction, held on July 28, according to a central bank reports.
Auction of 20-year BGTB was held on Tuesday of which 10 bids amounting to total of BDT 4.917 billion were offered. Of those, two bids amounting to total of BDT 1.25 billion were accepted, the Bangladesh Bank (BB), the country's central bank, said.
"Some commercial banks have quoted lower interest rates to invest their excess liquidity in the government-approved securities to minimize their cost of funds," a senior treasury official of a commercial bank said.
The overall excess liquidity with the commercial banks stood at BDT 347 billion in June 2009, registering a 165 percent growth over that of the same period of the previous calendar year, according to the BB.
The treasury official also said the demand for such securities has risen mainly due to lower interest rates on call money in the inter-bank market.
The call rate ranged between 0.15 percent and 3.50 percent on the day unchanged from the previous level. But most of the deals were made at rates between 0.15 per cent and 0.20 per cent on the day, market operators said.
Currently, four government bonds - 5-year, 10-year, 15-year and 20-year -are being traded in the markets.
BBN/SS/SI/AD-26August09-1:16 am (BST)