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The yield on Five-Year Bangladesh Government Treasury Bonds (BGTBs) posted a sharp rise on Tuesday as banks showed reluctance to invest in the securities.
The cut-off yield, generally known as the interest rate, on the BGTBs rose to 12.39 per cent on the day from 11.48 per cent earlier, according to auction results.
"Most banks are reluctant to invest their excess funds in government-approved long-term securities due to the ongoing uncertainty about future liquidity in the market," a senior executive at a leading private commercial bank told The Financial Express (FE).
He also said the banks were keeping a watchful eye on the possible impact of phasing out the 28-day repo facility on the market.
The Bangladesh Bank (BB) phased out its 28-day repo facility from April 10, aiming to reduce banks' reliance on the central bank's liquidity support and encourage them to manage their liquidity independently.
The government borrowed Tk 35 billion by issuing BGTBs on the day to meet its budget deficit partly.
Besides, the government borrowed Tk 5.0 billion on the day through reissuing Three-Year Floating Rate Treasury Bonds (FRTBs).
The cut-off yield on the FRTB rose to 13.15 per cent on the day from 12.49 per cent earlier.
"The earlier auction of the FRTBs held on Tuesday last week was cancelled due to a technical glitch," a BB senior official told the FE.
The FRTB is a bond bearing a coupon which is determined depending on the benchmark 91-day Bangladesh Compounded Rate (BCR). The BCR is a daily rate based on the cut-off yield on 91-Day Treasury Bills (T-bills). 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.
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