Dhaka, Bangladesh (BBN)- The interest rate on Treasury Bills (T-bills) dropped further Sunday, as commercial banks rushed to offer bids in the auction, treasury officials said.

The yield, generally known as interest rate, on 91-day T-bill fell to the range of 2.00-2.15 per cent Sunday from 2.50-2.71 per cent of the previous auction, held on July 5 last.

Besides, the yield on 364-day T-bill came down to 5.02- 5.71 per cent on the day from 5.07-5.90 per cent of the previous auction, according to the central bank statistics.

The demand for such government approved securities has sharply risen mainly due to lower interest rates on call money in the inter-bank market that has forced banks to invest in the securities, they added.

The call rate ranged between 0.10 per cent and 10.00 per cent on the day unchanged from the previous level. But most of the deals were made at rates between 0.10 per cent and 0.15 per cent on the day, market operators said.

“Some commercial banks have quoted lower interest rates to invest their excess liquidity in the risk-free government-approved securities to minimize cost of funds,” a senior treasury official of a commercial bank told BBN in Dhaka.

The overall excess liquidity with the commercial banks stood at Tk 270 billion in April last, representing a 25 per cent growth over that in February last, according to the Bangladesh Bank (BB).

The amount of excess liquidity was Tk 215 billion and Tk 237 billion in February and March 2009 respectively, the BB data showed.

Currently, three Treasury Bills (T-bills) are being transacted through auctions to adjust the government borrowings from the banking system.

The T-bills have 91-day, 182-day and 364-day maturity periods.

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

BBN/SS/SI/AD-13July09-1:14 pm (BST)