Dhaka, Bangladesh (BBN) - Yield on Bangladesh government securities witnessed a downward trend in the recent weeks as banks prefer to invest their excess funds in the risk-free instruments.
Most of the banks are now interested to invest their excess money in the risk-free government securities also to minimise their cost of funds, according to officials and market operators.
They also said the banks particularly new private commercial banks (PCBs) are purchasing the government securities to maintain SLR (statuary liquidity ratio) with the Bangladesh Bank (BB).
The yield, generally known as interest rate, on seven securities out of eight decreased slightly during the September 04-24 period against the previous auctions, according to latest official statistics.
The cut off yield on 91-day treasury bills (T-bills) came down to 3.80 per cent on September 24 from 3.86 per cent of the previous auction held on September 17 while the rate on 182-day T-bills stood down at 4.02 per cent from 4.10 per cent.
Besides, such yield on 364-day T-bills fell to 4.28 per cent on September 17 from previous 4.33 per cent, according to the central bank statistics.
However, the interest rate on 02-Year Bangladesh Government Treasury Bonds (BGTBs) dropped to 4.94 per cent on September 05 from 5.10 per cent on July 04, 2017 while such rate on 05-Year BGTBs came down to 5.84 per cent on September 12 from 5.93 per cent.
On the other hand, the yield on 10-Year BGTBs rose to 6.99 per cent on September 19 from 6.96 per cent on July 18, 2017.
The auction of other BGTBs –15-Year and 20-Year – is scheduled to be held at the central bank headquarters in Dhaka on September 26, according to the auction calendar, issued by the BB earlier.
Talking to BBN, a senior official of a leading private commercial bank said some banks prefer to buy the government securities to meet SLR requirement with the central bank.
Currently, the requisite SLR is 13 per cent daily for the conventional banks and 5.5 per cent daily for the Islamic Shari'ah-based banks of their average total demand and time liabilities.
“The borrowing from the banking system by the government may decrease slightly in next month because the excess liquidity with government account now stood at around BDT 15 billion,” a senior official familiar with the government debt- management activities hinted.
The government is set to borrow around BDT 98 billion in the month of September through issuing or re-issuing BGTBs and T-bills to make up for its current budget deficit partly.
Government’s net borrowings from the banking system will stand at BDT 20 billion by the end of this month after making repayment of BDT 78 billion against maturities of its securities, according to the official.
Currently, four T-bills are transacted on auction to adjust government borrowings from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
These bills are short-term investment tools issued through auctions, conducted by the central bank on behalf of the government.
Furthermore, five government bonds, with tenures of 02, 05, 10, 15 and 20 years respectively, are traded on the money market.
Meanwhile, the volume of excess liquidity rose to BDT 1.10 trillion as on July 20 last from BDT 1.06 trillion in the last week of June, according to the BB officials.
However, excess reserves, generally known as excess over daily minimum cash reserve requirement (CRR), with the central bank rose to around BDT 50 billion during the period under review from previous sum of BDT 45 billion.
“The amount of excess liquidity in the country’s banking system increased slightly during the period mainly due to lower bank borrowing by the government,” another central banker explained.
Such rising trend in excess liquidity in the banking system may continue in the near future, the central banker hinted.
The Ministry of Finance earlier had suspended its fresh borrowing from the banking system through cancelling auctions of its securities since July 23 till August 31 for ensuring proper cash management.
Besides, the government injected around BDT 20 billion into the market through making payments against maturity of the BGTBs in August, they added.
BBN/SSR/AD