Dhaka, Bangladesh (BBN) - The yield on five-year treasury bonds rose sharply on Tuesday, as banks showed reluctance to invest surplus funds in government securities, aiming to manage their portfolios more cautiously ahead of the national polls.
According to auction results, the cut-off yield—generally considered the interest rate—on Bangladesh Government Treasury Bonds (BGTBs) increased to 10.15 per cent from 9.34 per cent earlier.
Despite the rise, the government borrowed BDT 30 billion through the BGTBs to partially meet its budget deficit.
“Most banks are managing their funds cautiously to avoid any unexpected situation surrounding the upcoming national election,” a senior treasury official at a leading private commercial bank (PCB) said while explaining the latest market trend.
The official added that the banks are also reluctant to park excess funds in government securities ahead of the year-end closing on December 31.
The private banker also predicted that the current trend of higher yields on government securities may continue in the coming weeks.
Currently, five government bonds with tenures of two, five, 10, 15, and 20 years are actively traded in the market.
In addition, four treasury bills (T-bills) with 14-day, 91-day, 182-day, and 364-day maturities are auctioned to adjust government borrowing from the banking system.
BBN/SSR/AD