Dhaka, Bangladesh (BBN)- The interest rate on two more Bangladesh Government Treasury Bonds (BGTBs) fell significantly on Tuesday, as commercial banks rushed to offer bids in the auctions, officials said.
The yield, generally known as interest rate on 15-year BGTBs, came down to 11.59 per cent on the day from 11.87 per cent of the previous auction, held on July 22 last while the yield on 20-year BGTBs fell to 11.89 per cent from 12.10 per cent, according to the auction result.
Thirty eight bids amounting to a total of BDT 13.0493 billion were offered for 15-year BGTBs against pre-targeted amount of BDT 2.50 billion. Of those, four bids amounting to a total of BDT 2.50 billion were accepted.
Besides, 50 bids amounting to a total of BDT 16.0106 billion were offered for 20-year BGTBs against pre-targeted amount of BDT 2.50 billion. Of those, three bids amounting to a total of BDT 2.50 were accepted.
A total of 88 bids amounting to BDT 29.06 billion was submitted by the commercial banks on the day against notified amount of only BDT 5.0 billion.
Earlier on August 19 last, the yield on 10-year BGTBs came down to 11.33 per cent from 11.59 per cent of the previous auction, held on July 15 last.
“Most banks have quoted lower interest rates aggressively to invest their excess funds in the government securities to minimise their cost of funds,” a senior treasury official of a leading private commercial bank (PCB) explained.
Currently, the overall excess liquidity with the commercial banks stood at around BDT 1.30 trillion out of which most of the funds have been invested in the government securities.
The private banker also said there is no adequate scope to invest the bank’s excess liquidity in the form of loans and advances. “The declining trend of government securities yield may continue in the coming months due mainly to availability of low cost overseas funds.”
At present, 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-29Aug14-1:22 pm (BST)