Dhaka, Bangladesh (BBN) – The interest rate on Bangladesh Government Treasury Bonds (BGTB) dropped on Tuesday, as commercial banks rushed to offer bids in the auction, treasury officials said.

The yield, generally known as coupon interest rate, on 15-year BGTB fell to 8.5900 percent on the day from 9.3900 percent of the previous auction, held on July 14 last, according to a central bank press statement.

Auction of 15-year BGTB was held on the day of which 12 bids amounting to total of BDT5.924 billion were offered. Of those, 3 bids amounting to total of BDT 1.50 billion were accepted, the Bangladesh Bank (BB), the country’s central bank, said.  

“Most of the commercial banks have quoted lower interest rates to invest their excess liquidity in the government-approved securities to minimize their cost of funds,” a senior treasury official of a commercial bank said.

The overall excess liquidity with the commercial banks stood at $5.03 billion (BDT 347 billion) in June 2009, registering a 165 per cent growth over that of the same period of the previous calendar year, according to the BB.

The treasury official also said the demand for such securities has risen mainly due to lower interest rates on call money in the inter-bank market.

The call rate ranged between 0.10 per cent and 3.00 per cent on the day unchanged from the previous level. But most of the deals were made at rates between 0.15 per cent and 0.20 per cent on the day, market operators said.

Currently, four government bonds – 5-year, 10-year, 15-year and 20-year –are being traded in the markets.

BBN/SS/SI/AD-12August09-2:43 am (BST)