Dhaka, Bangladesh (BBN) - Yields on treasury bills (T-bills) displayed a mixed trend on Sunday as banks chose to channel their excess liquidity into shorter-tenure securities rather than longer-term ones ahead of the national election.
The cut-off yield—generally regarded as the interest rate—on the 91-day T-bills eased to 10.07 per cent from 10.09 per cent, while the yield on the 182-day T-bills slipped to 10.15 per cent from 10.30 per cent.
On the other hand, the yield on the 364-day T-bills edged up to 10.10 per cent from 10.04 per cent, according to auction results.
“Most banks are not interested in parking their excess funds in long-term T-bills as they are trying to manage liquidity more efficiently ahead of the upcoming national election,” a senior Bangladesh Bank (BB) official said while explaining the latest market dynamics.
However, the government borrowed BDT 87.89 billion, exceeding the pre-auction target of BDT 75 billion, through the issuance of all three types of T-bills to help finance its budget deficit.
Higher government funding requirements ahead of the national polls may push up yields on such securities in the near future, according to a senior treasury official at a leading private commercial bank.
“Most banks still prefer to invest excess funds in short-term T-bills to avoid potential interest rate volatility during the election period,” the treasury official explained.
The private banker also predicted the current trend in yields on government securities is likely to continue in the coming weeks.
Currently, four types of T-bills—14-day, 91-day, 182-day and 364-day—are auctioned to manage the government’s borrowing needs.
Additionally, five government bonds with tenures of two, five, 10, 15 and 20 years are actively traded in the market.
BBN/SSR/AD