Dhaka, Bangladesh (BBN) - The interest rate on the Bangladesh Government Treasury Bonds (BGTBs) felt further on Tuesday, as commercial banks rushed to offer bids in the auction, treasury officials of commercial banks said.
The yield, generally known as interest rate, on 10-year BGTBs came down to 11.02 per cent on the day from 11.35 per cent of the previous auction, held on August 20 last, according to them.
Fifty eight bids amounting to BDT 18.48 billion were offered against pre-targeted amount of Tk.4.0 billion for the 10-year BGTBs auction (re-issue) with 11.59 coupon rate.
Of those, 17 bids amounting to BDT 4.0 billion were accepted, according to the auction result.
The cut-off price of the accepted bid was BDT 103.4555 (per BDT 100.00), it added.
The treasury officials of commercial banks also said the demand for such government approved securities has sharply risen mainly due to higher excess liquidity, held by the commercial banks because of lower credit demand in the recent months.
"Some banks have quoted lower interest rates aggressively to invest their excess liquidity in the risk-free government securities to minimise their cost of funds," a senior treasury official of a leading private commercial bank (PCB) told BBN in Dhaka.
Currently, the overall excess liquidity with the commercial banks stood at more than 1.0 trillion out of which most of funds have been invested in the government securities.
Sluggish trend of investment has forced the banks to invest their excess funds in the long-term government treasury bonds with lower yield, the treasury official explained.
Currently, three treasury bills (T-bills) are being transacted through auctions to adjust the government's borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with duration of two, five, 10, 15 and 20 years respectively - are being traded in the market.
BBN/SSR/AD-17Sept14-11:12 am (BST)