Dhaka, Bangladesh (BBN)- The yield on two-year Bangladesh Government Treasury Bonds (BGTBs) increased significantly on Tuesday as banks expressed unwillingness to invest their excess liquidity in the securities ahead of Eid-ul-Azha.
The cut off yield, generally known as interest rate, on the BGTBs rose to 12.29 per cent on the day from 11.97 per cent earlier, according to auction results.
The government borrowed BDT 35 billion through issuing the BGTBs on the day to meet its budget deficit.
Most banks have been reluctant to invest their excess funds in the risk-free securities ahead of the Eid, according to market insiders.
They also predicted that yields on BGTBs may ease slightly after the Eid vacation.
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 reached 13.19 per cent on the day from 12.94 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