Dhaka, Bangladesh (BBN)- Yields on treasury bills (T-bills), particularly the short-term ones, rose sharply on Sunday, as banks appeared reluctant to invest their excess liquidity in risk-free government securities ahead of the year-end closing.
The cut-off yield, generally known as interest rate, on the 91-day T-bills climbed to 10.24 per cent on the day from 9.53 per cent previously, while the yield on the 182-day T-bills inched up to 9.99 per cent from 9.98 per cent earlier.
In addition, the yield on the 364-day T-bills remained unchanged at 9.99 per cent from the previous level, according to the auction results.
However, the government borrowed BDT 75 billion on the day through the issuance of three types of T-bills to partly meet its budget deficit.
“Majority banks are reluctant to park their excess funds in short-term T-bills, particularly the 91-day ones, ahead of the year-end closing on December 31,” a senior official of the Bangladesh Bank (BB) said while explaining the latest market situation.
The government borrowed BDT 35 billion out of the targeted BDT 75 billion through the issuance of 91-day T-bills to meet its budget deficit, according to the central banker.
“Actually, banks now prefer long-term T-bills over short-term ones to avoid possible declines in interest rates in the coming months,” a senior treasury official at a leading private commercial bank (PCB) while replying to a query.
The private banker also predicted that the existing trend in yields on government securities may continue in the coming weeks.
Currently, four types of T-bills are transacted through auctions to adjust government borrowings from the banking system. The T-bills have maturity periods of 14, 91, 182, and 364 days.
In addition, five government bonds — with tenures of two, five, 10, 15, and 20 years — are also traded in the market.
BBN/SSR/AD