Dhaka, Bangladesh (BBN)- Yields on long-term treasury bonds dropped below the central bank’s policy rate on Tuesday, as banks parked surplus funds in government securities amid weak private credit demand ahead of the national election.
The cut off yield, generally known as interest rate, on the 15-Year Bangladesh Government Treasury Bonds (BGTBs) came down to 9.67 per cent on the day from 10.28 per cent earlier while the yield on the 20-Year BGTBs fell to 9.70 per cent from 10.38 per cent, according to the auction results.
Currently, the central bank’s policy rate, also known as the repo rate, is 10 per cent.
However, the government borrowed BDT 20 billion on the day through issuing the long-term BGTBs to meet its budget deficit partially.
Earlier on Sunday, the yields on two types of treasury bills (T-bills) dropped below 10 per cent, while the rate on 91-day T-bills remained at 10 per cent on the same ground.
The yields on two categories of long-term treasury bonds have been on a declining trend since July, driven by rising liquidity inflows into the market amid subdued credit demand from both the public and private sectors, according to market insiders.
Earlier on July 29 last, the yield on the 15-Year BGTBs dropped to 10.48 per cent from 12.59 per cent earlier while the yield on the 20-Year BGTBs fell to 10.55 per cent from 12.49 per cent.
Actually, a section of banks are now willing to invest their excess funds in the risk-free government securities mainly due to lower private sector credit demand ahead of the national election, they explained.
Meanwhile, the growth in private sector credit stood at 6.52 per cent in July 2025 on a year-on-year basis, from 6.49 per cent a month ago, indicating weakening business confidence and tighter lending conditions.
In addition, the government’s relatively lower borrowing requirement –particularly in the first quarter of each fiscal year – has contributed to the decline in yields on the government securities, the insiders noted.
On the other hand, market interventions by the central bank, through purchasing the US dollars from banks, have helped increase liquidity inflows into the market recently.
The central bank purchased US$129.50 million more through auction from 13 banks in the interbank spot market on Monday aiming to keep the exchange rate of the US dollar against the local currency stable.
The amount was bought under the Multiple Price Auction method and the cutoff rate was BDT 121.75 per dollar.
The Bangladesh Bank (BB) has so far bought $1.88 billion from banks directly since July 13 last under the prevailing free-floating exchange rate arrangement, according to official latest data.
Currently, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
Besides, four treasury bills (T-bills) are transacted through auction to adjust government borrowings from the banking system.
The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
BBN/SSR/AD