Dhaka, Bangladesh (BBN)– The central bank of Bangladesh Bank reintroduced the auction of 30-day Bangladesh Bank Bills on Monday aiming to mop up the excess liquidity from the market, officials said.
The Bangladesh Bank (BB) accepted 22 bids worth BDT 5.85 billion at the auction on the day for the bills, resulting in withdrawal of the money from the market today (Tuesday), they added.
A total of 38 bidders offered bids worth BDT 16.90 billion for the short-term security.
The ranges of the implicit yield, generally known as interest rate, of the accepted bids were 0.70-1.00 per cent annually, the BB officials confirmed.
“It is a temporary measure totally. When the market will turn around then the measure may be suspended,” General Manager of the Debt Management Department of the BB Mijanur Rahman Joddar said.
The treasury officials, however, urged the central bank to continue the auction of the special bill until the pressure on excess liquidity becomes easy in the banking sector.
“The BB should use the monetary tool further to mop up the excess liquidity from the market,” a senior treasury official of a foreign commercial bank said.
The central bank reintroduced 30-day and 91-day Bangladesh Bank Bills in October 2006 as the monetary policy instruments following decision that the government treasury bills and the bond auctions are exclusively used for the government debt management.
However, the auction of 91-day Bangladesh Bank Bill was discontinued to avoid its duplication with 91-day Treasury bill from January 8, 2008. There was also no auction of 30-day Bangladesh Bank Bill from January 8, 2008, according to the central bank’s annual report for 2007-08.
Besides, the central bank has sold the government securities directly to the commercial banks aiming to pump out excess liquidity from the money market, officials said.
The central bank has taken the move against the backdrop of pilling up of excess liquidity in the banking sector to all-time high at BDT 347 billion in June 2009, registering a 165 per cent growth over that of the same period of the previous calendar year.
As part of the move, the central bank has sold treasury bills (T-bills) worth BDT 1.96 billion to three commercial banks directly in the last week using its secondary window, they added.
Currently, three T-bills are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have 91-day, 182-day and 364-day maturity periods.
BBN/SS/SI/AD-11August09-2:12 am (BST)