Dhaka, Bangladesh (BBN) -- The yield on two-year Bangladesh Government Treasury Bonds (BGTBs) fell below the central bank’s policy rate on Tuesday, as banks continued to park excess liquidity in government securities amid subdued private sector credit demand.
The cut-off yield — commonly known as the interest rate — on the two-year BGTBs declined to 9.74 per cent from 10.46 per cent at the previous auction, according to the auction results.
Currently, the Bangladesh Bank’s (BB) policy rate, also known as the repo rate, stands at 10 per cent.
Earlier, on March 1, yields on three types of treasury bills (T-bills) had also dropped below the policy rate on similar grounds.
On the day, the government raised BDT 25 billion by issuing BGTBs to partially finance its budget deficit.
“Most banks are opting to invest their excess funds in risk-free government securities, primarily due to subdued private sector credit demand amid lingering uncertainty following the just-concluded national election,” a senior BB official said while explaining latest market situation.
The central bank expects private sector credit demand to gradually pick up in the coming months.
Meanwhile, private sector credit growth stood at 6.10 per cent year-on-year in December 2025, down from 6.58 per cent a month earlier, according to the central bank’s latest data.
The BB official also noted that higher inflows of inward remittances have boosted liquidity in the banking system, putting downward pressure on BGTB yields.
In addition, the government borrowed BDT 5.0 billion on the same day through the issuance of three-year Floating Rate Treasury Bonds (FRTBs).
The cut-off yield on the FRTB fell to 10.02 per cent from 10.58 per cent earlier.
The FRTB’s coupon is determined by adding a spread to the benchmark 91-day Bangladesh Compounded Rate (BCR). The BCR is a daily reference rate derived from the cut-off yield of 91-day T-bills and is primarily used to price floating-rate government instruments.
Currently, five government bonds with tenures of two, five, 10, 15 and 20 years are traded in the market.
Besides, four T-bills — with maturities of 14 days, 91 days, 182 days and 364 days — are auctioned regularly to adjust government borrowings from the banking system.
BBN/SSR/AD