Dhaka, Bangladesh (BBN)- The interest rate on the Bangladesh Government Treasury Bonds (BGTBs) felt significantly on Tuesday, as commercial banks rushed to offer bids in the auction, treasury officials said.
The yield, generally known as interest rate, on 10-year BGTBs came down to 11.33 per cent on the day from 11.59 per cent of the previous auction, held on July 15 last, according to the central bank statistics.
Eighty bids amounting to BDT 24.78 billion were offered against pre-targeted amount of BDT 4.0 billion for the 10-year BGTBs auction (re-issue) with 11.59 coupon rate.
Of those, 21 bids amounting to Tk.4.0 billion were accepted, according to the auction result.
The cut-off price of the accepted bid was BDT 101.3816 (per BDT 100.00), it added.
The treasury officials of commercial banks also said the demand for such government approved securities has sharply risen mainly due to higher excess liquidity, held by the commercial banks because of lower credit demand in the recent months.
“Most of the banks have quoted lower interest rates aggressively to invest their excess liquidity in the risk-free government securities to minimise their cost of funds,” a senior treasury official of a commercial bank (PCB) told BBN in Dhaka.
At present, the overall excess liquidity with the commercial banks stood at more than BDT 1.0 trillion out of which most of funds have been invested in the government securities.
Sluggish trend of investment has forced the banks to invest their excess funds in the long-term government treasury bonds with lower yield, the private banker noted.
Currently, three treasury bills (T-bills) are being transacted through auctions to adjust the government’s borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with duration of two, five, 10, 15 and 20 years respectively – are being traded in the market.
BBN/SSR/AD-19Aug14-11:50 pm (BST)