Dhaka, Bangladesh (BBN) - The yield on five-year treasury bonds dropped below the central bank’s policy rate on Tuesday, as banks continued to invest excess liquidity in government securities amid subdued private sector credit demand before the national election.
The cut off yield, generally known as interest rate, on the Bangladesh Government Treasury Bonds (BGTBs) came down to 9.34 per cent on the day from 10.03 per cent earlier, according to auction results.
Currently, the Bangladesh Bank (BB)’s policy rate, also known as the repo rate, is 10 per cent.
Earlier on September 09 last, the yield on five-year BGTBs fell to 10.03 per cent from 10.28 per cent on the same ground.
However, the government borrowed BDT 30 billion on the day through issuing the BGTBs to meet its budget deficit partially.
“Most banks are showing interest in investing their surplus funds in government securities, supported by increased liquidity inflows into the market,” a senior Bangladesh Bank (BB) official said while explaining the latest market development.
Market interventions by the central bank, through purchasing the US dollars from banks, have helped increase liquidity inflows into the market, the BB official explained.
As part of the ongoing intervention, the central bank purchased an additional US$38 million more from six banks through an auction on Tuesday aiming to keep the exchange rate of the US dollar against the local currency stable.
The central bank has so far bought $2.13 billion from banks directly since July 13 last under the prevailing free-floating exchange rate arrangement, according to official latest data.
“The existing lower private sector credit demand has also pushed up banks to invest more excess liquidity in the government securities,” the BB official added.
Meanwhile, the growth in private sector credit fell to 6.35 per cent in August 2025 on a year-on-year basis, from 6.52 per cent a month ago, indicating weakening business confidence and tighter lending conditions.
The central banker also predicted that the existing trend of yields on the government securities may continue in the coming weeks.
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