Dhaka, Bangladesh (BBN)– The interest rate on the Bangladesh Government Treasury Bonds (BGTB) has increased recently mainly due to lower interest of commercial banks in buying the instruments ahead of the Eid.
The cutoff yield, generally known as interest rate, on 05-Year BGTB rose to 5.83 per cent on Tuesday from 5.10 per cent of the previous auction held on February 14, 2017, according to the auction results.
Talking to BBN, a senior official of the Bangladesh Bank (BB), the country’s central bank, said the interest rate on the BGTB has been fixed in line with the market requirement.
The government borrowed BDT 10 billion through re-issuing the BGTB at an auction held at the central bank headquarters in the capital on the day to meet its budget deficit partly, he added.
Earlier on June 06, the cutoff yield on the 02-year BGTB rose to 5.05 per cent from 4.44 per cent of the previous auction held on March 01 last.
“Some banks are not interested to invest their excess funds in the securities to avert any possible liquidity pressure before the Eid-ul-Fitr festival,” a senior treasury official of a leading private commercial bank explained.
He also said bigger amount of issue at an action helped in increasing the interest rate on the long-term government security.
Currently, three treasury bills (T-bills) are being transacted through auction to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years respectively are traded on the money market.