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In a striking shift, the yield on long-term treasury bonds plunged by 187 basis points in a single day, as banks scrambled to park surplus liquidity in risk-free government securities amid tepid credit demand from the private sector.
The cut-off yield, generally known as the interest rate, on the 10-Year Bangladesh Government Treasury Bonds (BGTBs) dropped to 10.48 per cent on Tuesday, down from 12.35 per cent, according to the auction results.
The sharp fall in yields on government securities-particularly the long-tenure BGTBs-was driven by active bidding from some liquidity-rich commercial banks, market operators said.
They explained that banks are trying to reduce their valuation losses by pushing yields on these instruments to lower levels.
"It's an abnormal behaviour in the fixed income market that will not support the development of a deep and vibrant secondary market," a senior treasury official at a leading private commercial bank (PCB) told The Financial Express (FE).
He also warned that if such a situation persists, individuals and corporate entities may lose interest in investing their surplus funds in government securities.
Central bank officials, however, described the sharp fall as a temporary market correction and expressed hope that stability would return soon.
Speaking to FE, a senior Bangladesh Bank (BB) official said the continued weakness in private sector credit growth is prompting banks to deploy excess funds in government-approved instruments.
The growth in private sector credit fell to 7.17 per cent in May 2025 on a year-on-year basis, down from 7.50 per cent in April, reflecting weakening business sentiment and tighter lending conditions.
The BB official added that the declining trend in BGTB yields may persist in the weeks ahead.
Despite the yield decline, the government raised Tk 30 billion on the day by issuing the long-term bonds to partly finance its budget deficit.
Currently, five government bonds with tenures of two, five, 10, 15, and 20 years are actively traded in the market.
Earlier, on July 20, yields on treasury bills (T-bills) also dipped below the 11 per cent threshold for similar reasons.
On that day, the cut-off yield on the 91-Day T-bills fell to 10.45 per cent from 11.58 per cent earlier, while the yield on 364-Day T-bills declined to 10.98 per cent from 11.25 per cent. The yield on 182-Day T-bills also dropped to 10.70 per cent from 11.55 per cent previously.
At present, four types of T-bills are transacted through auctions to manage government borrowings from the banking system. These T-bills mature in 14, 91, 182, and 364 days, respectively.
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