Dhaka, Bangladesh (BBN) – The yield on two-year Bangladesh Government Treasury Bonds (BGTBs) dropped significantly on Tuesday, as banks expressed a strong willingness to invest their surplus liquidity in the securities.
The cut off yield, generally known as interest rate, on the BGTBs came down to 11.97 per cent on the day from 12.18 per cent earlier, according to auction results.
The government borrowed BDT 45 billion through issuing the BGTBs on the day to meet its budget deficit partly.
Most banks are interested in investing their excess funds in the BGTBs, as liquidity inflows are rising in the market, according to market operators.
Higher inflow of remittance along with lower credit growth to the private sector has helped improve liquidity situation on the market, they explained.
Besides, the government borrowed BDT 5.0 billion on the day through issuing Three-Year Floating Rate Treasury Bonds (FRTBs).
The cut off yield on the FRTB fell to 12.94 per cent on the day from 13.15 per cent earlier.
The FRTB is a bond whose coupon is determined by adding spread with benchmark 91 days Bangladesh Compounded Rate (BCR).
The BCR is a daily rate based on the cut-off yield of 91-Day Treasury Bills (T-bills) auction. This is a reference rate which is primarily used to set the rate of floating rate instruments of the government.
Currently, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
Besides, four treasury bills (T-bills) are transacted through auction to adjust government borrowings from the banking system.
The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
BBN/SSR/AD