All scheduled banks are now allowed to extend overdraft or term loan facilities to customers by keeping Treasury Bonds as collateral, according to a notification, issued by the Bangladesh Bank (BB), on Wednesday.

However, the securities must first be marked as ‘lien’ in the Financial Market Infrastructure (FMI) system before providing any loan facilities to clients.

A lien is a legal right or claim that a lender has over an asset (the T-bonds) belonging to a borrower.

The BB latest moves came after the banks expressed interest in offering credit facilities backed by T-bonds, as bonds placed under lien have now been recognised as eligible collateral.

Earlier on November 27, 2024, the central bank asked scheduled banks to follow specific conditions when providing credit facilities against government securities.

“Banks have expressed their interest in extending credit facilities to clients against Treasury Bonds held under lien,” the central bank said in the notification.

The central bank has capped such lending at a maximum of 75 per cent of the face value of the T-bonds used as collateral.

The banks have also been instructed to ensure that the outstanding loan amount does not exceed the bond’s face value under any circumstances, including due to accrued interest, the notification added.

In addition, the maturity of the loan must not exceed the maturity period of the underlying bond, a measure designed to avoid potential asset-liability mismatches and repayment risks.

The notification also bars the banks from extending loans for the purpose of purchasing T-bonds, a step aimed at preventing leveraged investment in government securities.

The move will enable investors to unlock liquidity from their bond holdings without selling them in the market, according to bankers.

“This facility may help investors manage short-term liquidity needs while retaining their investments in government securities,” a senior treasury official at a leading private commercial bank said while replying to a query.

Market participants believe the decision could also strengthen activity in the government bond market by making T-bonds more versatile financial instruments.

Treasury officials noted that allowing loans against bonds could encourage institutional investors, corporates and high-net-worth individuals to hold government securities for longer periods, as they would have the option to access liquidity when needed.

Currently, five Bangladesh Government Treasury Bonds with maturities of two, five, 10, 15 and 20 years are traded in the market.

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The cut-off yield—commonly known as the interest rate—on the five-year Bangladesh Government Treasury Bonds (BGTBs) fell to 10.22 per cent at the latest auction, down from 10.32 per cent previously, according to official results.

The government raised BDT 25 billion through the issuance of the bonds as part of its ongoing efforts to finance the budget deficit through domestic borrowing.

The latest fall in yields indicates growing liquidity in the banking system and cautious lending behaviour by banks, despite the central bank maintaining a relatively tight monetary stance.

The fact that yields on some government securities are moving close to—or even below—the policy rate reflects banks’ strong appetite for relatively risk-free instruments in an uncertain economic environment, analysts say.

Banks shifting strategy amid weak credit demand

Bankers say many lenders are increasingly allocating surplus funds to government securities as private investment remains sluggish.

“Most banks are parking their excess funds in risk-free government securities as private-sector credit demand remains subdued amid ongoing geopolitical tensions,” a senior official of Bangladesh Bank (BB) said while explaining the latest market situation.

The current trend indicates that banks are prioritising liquidity management and balance-sheet stability over aggressive lending, particularly as businesses remain cautious about expanding investment.

Credit slowdown reinforces trend

Latest BB data show that private-sector credit growth slowed to 6.03 per cent year-on-year in January 2026, down slightly from 6.10 per cent in December, highlighting the continuing weakness in investment activity.

The growth rate is significantly below the central bank’s monetary programme targets, suggesting that the transmission of higher interest rates into economic activity has remained uneven.

Economists say that when private credit demand remains weak, banks tend to redirect funds into government securities, which in turn puts downward pressure on yields.

Implications for interest-rate outlook

Market analysts say the recent decline in yields on treasury instruments could signal early signs of easing pressure in the domestic interest-rate environment, although the overall monetary policy stance remains tight.

If the trend of slow credit growth and strong liquidity inflows continues, yields on government securities—particularly shorter and medium-term instruments—may remain under downward pressure in the near term.

However, economists caution that external risks, including volatile energy prices and geopolitical tensions, could still influence liquidity conditions and borrowing costs.

Government securities market structure

Currently, five Bangladesh Government Treasury Bonds with maturities of two, five, 10, 15 and 20 years are traded in the market.

In addition, four treasury bills —with maturities of 14 days, 91 days, 182 days and 364 days —are issued through auctions to help the government manage short-term borrowing from the banking system and maintain liquidity balance in the financial market.

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The cut-off yield — commonly known as the interest rate — on the two-year BGTBs declined to 9.74 per cent from 10.46 per cent at the previous auction, according to the auction results.

Currently, the Bangladesh Bank’s (BB) policy rate, also known as the repo rate, stands at 10 per cent.

Earlier, on March 1, yields on three types of treasury bills (T-bills) had also dropped below the policy rate on similar grounds.

On the day, the government raised BDT 25 billion by issuing BGTBs to partially finance its budget deficit.

“Most banks are opting to invest their excess funds in risk-free government securities, primarily due to subdued private sector credit demand amid lingering uncertainty following the just-concluded national election,” a senior BB official said while explaining latest market situation.

The central bank expects private sector credit demand to gradually pick up in the coming months.

Meanwhile, private sector credit growth stood at 6.10 per cent year-on-year in December 2025, down from 6.58 per cent a month earlier, according to the central bank’s latest data.

The BB official also noted that higher inflows of inward remittances have boosted liquidity in the banking system, putting downward pressure on BGTB yields.

In addition, the government borrowed BDT 5.0 billion on the same day through the issuance of three-year Floating Rate Treasury Bonds (FRTBs).

The cut-off yield on the FRTB fell to 10.02 per cent from 10.58 per cent earlier.

The FRTB’s coupon is determined by adding a spread to the benchmark 91-day Bangladesh Compounded Rate (BCR). The BCR is a daily reference rate derived from the cut-off yield of 91-day T-bills and is primarily used to price floating-rate government instruments.

Currently, five government bonds with tenures of two, five, 10, 15 and 20 years are traded in the market.

Besides, four T-bills — with maturities of 14 days, 91 days, 182 days and 364 days — are auctioned regularly to adjust government borrowings from the banking system.

BBN/SSR/AD

The cut-off yield, generally regarded as the interest rate, on the Bangladesh Government Treasury Bonds (BGTBs) declined to 10.46 per cent on the day from 10.51 per cent earlier, according to auction results.

Earlier, on January 6, the cut-off yield on the BGTBs had fallen to 10.51 per cent from 10.72 per cent on the same ground.

“Most of banks are now parking excess liquidity in government-approved securities as private sector credit demand remains weak ahead of the upcoming national election,” a senior Bangladesh Bank (BB) official said, explaining the latest market situation.

He also said higher remittance inflows, coupled with the central bank’s purchases of US dollars, have improved market liquidity, helping ease yields on government securities. The central banker further predicted that the existing downward trend in government securities’ yields may continue in the coming weeks.

On the day, the government raised BDT 25 billion through the issuance of BGTBs to partially finance its budget deficit. Besides, it borrowed another BDT 5.0 billion through issuing three-year Floating Rate Treasury Bonds (FRTBs).

The cut-off yield on the FRTBs also declined to 10.58 per cent from 10.67 per cent earlier.

The FRTB is a bond whose coupon rate is determined by adding a spread to the benchmark 91-day Bangladesh Compounded Rate (BCR). The BCR is a daily reference rate based on the cut-off yield of 91-day Treasury Bills (T-bills) and is primarily used to set the rates of floating-rate government instruments.

Currently, five government bonds with tenures of two, five, 10, 15 and 20 years are traded in the market.

Besides, four treasury bills with maturities of 14 days, 91 days, 182 days and 364 days are auctioned regularly to manage government borrowings from the banking system.

Market operators, however, said the central bank’s US dollar purchases injected liquidity into the market in the form of Bangladesh Taka (BDT), pushing bond yields lower.

As part of its ongoing open market operations, the central bank on Tuesday purchased an additional US$171 million from 16 banks through an interbank spot market auction.

The amount was bought under the Multiple Price Auction method, with a cut-off rate of BDT 122.30 per dollar, according to central bank officials.

The Bangladesh Bank has so far purchased $4.32 billion from scheduled banks directly since July 13 last under the prevailing free-floating exchange rate regime, BB data showed.

Central bankers said the interventions aim to maintain exchange rate stability, preserve export competitiveness and support steady remittance inflows. They also noted that the purchases are helping gradually rebuild the country’s foreign exchange reserves.

Meanwhile, Bangladesh’s gross foreign exchange reserves rose to $33.24 billion on February 2 this year from $33.18 billion on January 29, according to the central bank’s traditional calculation.

Under the International Monetary Fund’s Balance of Payments and International Investment Position Manual, sixth edition (BPM6), the reserves stood at $28.75 billion, up from $28.68 billion during the same period.

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The cut-off yield—commonly referred to as the interest rate—on Bangladesh Government Treasury Bonds (BGTBs) declined to 10.31 per cent from 10.84 per cent earlier, according to auction results.

The government borrowed BDT 30 billion through the issuance of the bonds to partially meet its budget deficit.

“Most banks are parking excess liquidity in government securities as private sector credit demand remains weak ahead of the upcoming national election,” said a senior treasury official at a leading private commercial bank.

Private sector credit growth stood at 6.58 per cent year-on-year in November 2025, up slightly from 6.23 per cent in October, central bank data showed.

Higher remittance inflows, coupled with the central bank’s purchases of US dollars, have boosted market liquidity and contributed to easing yields on government securities, the banker added.

He also expected the downward trend in yields to continue in the coming weeks.

Currently, five government bonds with tenures of two, five, 10, 15 and 20 years are traded in the market. In addition, four treasury bills—14day, 91-day, 182-day and 364-day—are auctioned to manage government borrowing from the banking system.

BBN/SSR/AD

The cut-off yield—commonly referred to as the interest rate—on the 15-year Bangladesh Government Treasury Bonds (BGTBs) increased to 10.89 per cent from 10.74 per cent, while the yield on the 20-year BGTBs edged up to 10.90 per cent from 10.82 per cent, according to auction results.

Earlier on November 25, the cut-off yield on the 15-year BGTBs had climbed to 10.74 per cent from 10.09 per cent, and the yield on the 20-year BGTBs rose to 10.82 per cent from 10.30 per cent.

On Tuesday, the government raised BDT 20 billion by issuing these long-term BGTBs to partially finance its budget deficit.

“Most banks are reluctant to invest their excess funds in long-term securities as they seek to manage their portfolios more efficiently ahead of the year-end closing on December 31,” a senior official of the Bangladesh Bank (BB) said while explaining the latest market situation.

He also said banks are managing their funds cautiously to mitigate uncertainties surrounding the upcoming national election scheduled for February 12, adding that the current upward trend in BGTB yields may continue in the coming weeks.

At present, five government bonds—with tenures of two, five, 10, 15 and 20 years—are traded in the market.

In addition, four treasury bills (T-bills) are issued through auction to manage government borrowings from the banking system. The T-bills carry maturity periods of 14 days, 91 days, 182 days and 364 days.

BBN/SSR/AD

The cut-off yield—commonly referred to as the interest rate—on Bangladesh Government Treasury Bonds (BGTBs) rose to 10.84 per cent from 10.79 per cent earlier, according to auction results.

The government raised BDT 30 billion on the day through the issuance of BGTBs to partially finance the deficit.

“Most banks were reluctant to invest their excess funds in BGTBs after the government announced additional borrowing from the banking system to meet its expenditures,” a senior Bangladesh Bank (BB) official said, explaining the latest market situation.

On Sunday, the central bank issued a special auction notice to borrow BDT 50 billion through 91-day treasury bills (T-bills) for the same reason.

The central banker also anticipated that the current trend in government securities yields may persist in the coming weeks.

At present, five types of government bonds—with maturities of two, five, 10, 15 and 20 years—are traded in the market.

Additionally, four categories of T-bills, with maturities of 14, 91, 182 and 364 days, are auctioned to manage the government’s short-term borrowing needs from the banking system.

BBN/SSR/AD

The cut-off yield on the 15-year Bangladesh Government Treasury Bonds (BGTBs) increased to 10.74 per cent from 10.09 per cent, while the yield on the 20-year BGTBs climbed to 10.82 per cent from 10.30 per cent, according to the auction results.

On the same day, the government mobilised BDT 20 billion through the issuance of these long-term BGTBs to help finance its budget deficit.

“Most banks are reluctant to invest their excess funds in long-term government securities as part of their efforts to manage portfolios more efficiently ahead of the year-end closing on December 31,” a senior Bangladesh Bank (BB) official said, explaining the current market dynamics.

Banks are also managing their funds cautiously to mitigate any uncertainties surrounding the upcoming national election, the central banker added.

He further noted that the existing upward trend in BGTB yields may persist 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

According to auction results, the cut-off yield—essentially the interest rate—on Bangladesh Government Treasury Bonds (BGTBs) rose to 10.39 per cent, up from 9.99 per cent previously.

Despite the upward pressure on yields, the government managed to borrow BDT 25 billion through the issuance of BGTBs to help finance its budget deficit.

“Most banks are reluctant to park their excess funds in long-term securities for the sake of efficient portfolio management,” a senior treasury official at a leading private commercial bank said, explaining the prevailing market sentiment.

The banker also anticipated that the current rising trend in government securities yields is likely to persist in the coming weeks.

Currently, five types of government bonds—with maturities of 2, 5, 10, 15, and 20 years—are 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 help the government manage its short-term borrowing needs.

BBN/SSR/AD

The cut off yield, generally known as interest rate, on the 15-Year Bangladesh Government Treasury Bonds (BGTBs) came down to 9.67 per cent on the day from 10.28 per cent earlier while the yield on the 20-Year BGTBs fell to 9.70 per cent from 10.38 per cent, according to the auction results.

Currently, the central bank’s policy rate, also known as the repo rate, is 10 per cent.

However, the government borrowed BDT 20 billion on the day through issuing the long-term BGTBs to meet its budget deficit partially.

Earlier on Sunday, the yields on two types of treasury bills (T-bills) dropped below 10 per cent, while the rate on 91-day T-bills remained at 10 per cent on the same ground.

The yields on two categories of long-term treasury bonds have been on a declining trend since July, driven by rising liquidity inflows into the market amid subdued credit demand from both the public and private sectors, according to market insiders.

Earlier on July 29 last, the yield on the 15-Year BGTBs dropped to 10.48 per cent from 12.59 per cent earlier while the yield on the 20-Year BGTBs fell to 10.55 per cent from 12.49 per cent.

Actually, a section of banks are now willing to invest their excess funds in the risk-free government securities mainly due to lower private sector credit demand ahead of the national election, they explained.

Meanwhile, the growth in private sector credit stood at 6.52 per cent in July 2025 on a year-on-year basis, from 6.49 per cent a month ago, indicating weakening business confidence and tighter lending conditions.

In addition, the government’s relatively lower borrowing requirement –particularly in the first quarter of each fiscal year – has contributed to the decline in yields on the government securities, the insiders noted.

On the other hand, market interventions by the central bank, through purchasing the US dollars from banks, have helped increase liquidity inflows into the market recently.

The central bank purchased US$129.50 million more through auction from 13 banks in the interbank spot market on Monday aiming to keep the exchange rate of the US dollar against the local currency stable.

The amount was bought under the Multiple Price Auction method and the cutoff rate was BDT 121.75 per dollar.

The Bangladesh Bank (BB) has so far bought $1.88 billion from banks directly since July 13 last under the prevailing free-floating exchange rate arrangement, according to official latest data.

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