Dhaka, Bangladesh (BBN) - The yield on long-term treasury bonds declined further on Tuesday as banks continued to channel their excess liquidity into risk-free government securities, reflecting subdued demand for private sector credit ahead of the upcoming national election.
According to auction results, the cut-off yield on the 10-year Bangladesh Government Treasury Bonds (BGTBs) fell to 10.26 per cent from 10.48 per cent in the previous auction.
Earlier on July 22, the same bond yield had dropped from 12.35 per cent to 10.48 per cent, marking a steady downward trend.
“Some banks prefer to invest their excess funds in BGTBs due to lower credit demand from the private sector ahead of the general election,” a senior official of the Bangladesh Bank (BB) said.
The official added that the existing trend in yields on government securities may persist in the coming weeks.
On Tuesday, the government borrowed BDT 16 billion through issuing the long-term bonds to partly finance its budget deficit.
Private Credit Growth Weakens
The shift in investment patterns comes at a time when private sector credit growth is losing momentum. Credit growth stood at 6.49 per cent year-on-year in June 2025, down from 7.17 per cent in May, reflecting weaker business confidence and tighter lending conditions.
Analysts note that banks’ growing preference for government securities underscores their cautious approach to risk-taking, particularly as the political climate and sluggish investment demand weigh on lending opportunities.
Government Debt Instruments in Focus
Currently, five types of government bonds are traded in the market, with maturities of 2, 5, 10, 15, and 20 years. In addition, four treasury bills (T-bills) are auctioned to adjust the government’s borrowing needs from the banking system, with maturities of 14, 91, 182, and 364 days.
Market insiders say yields on these instruments are likely to remain volatile depending on liquidity conditions, fiscal needs, and evolving credit demand from the private sector.
BBN/SSR/AD