Yields on the government treasury bonds (T-bonds) increased significantly on Tuesday, as the banks were reluctant to invest their funds in the long-term securities ahead of the national polls.
The cut-off yield, generally known as interest rate, on 15-Year Bangladesh Government Treasury Bonds (BGTBs) rose to 7.55 per cent on the day from 7.20 per cent of the previous auction, held on September 26.
On the other hand, the cut-off yield on 20-Year BGTBs reached 8.24 per cent on the day from 7.97 per cent of the previous auction, according to the auction results, issued by Bangladesh Bank (BB).
"The yields on both BGTBs were re-fixed in line with the market requirement on the day," a BB senior official told the FE.
The government borrowed Tk 12 billion on Tuesday through issuing the bonds to finance budget deficit partly ahead of the parliamentary election, the central banker explained.
Senior bankers, however, said the upward yield trend of the government securities may continue until the new government takes power.
The excess liquidity in banks dropped by nearly 15 per cent to around Tk 800 billion in September from Tk 940 billion three months before, mainly due to higher circulation of currency outside the banking system before the polls.
The central bank's continuous selling of the US dollar has also reduced the amount of excess liquidity in the banks, particularly in the state-owned commercial banks (SoCBs), they added.
BB resumed offering the support by selling the US currency directly to the banks in recent months to keep the foreign exchange market stable.
As part of the move, the central bank sold US$45 million directly to three SoCBs on Tuesday to meet the growing demand for the greenback in the market.
On Monday, BB also sold $50 million to five commercial banks on the same ground.
"A substantial amount of liquidity has already reached the central bank's vault in exchange for the recently-sold US currency," a senior treasury official of a leading private commercial bank (PCB) told the FE.
Nearly Tk 67 billion entered into BB's vault in exchange for $799 million, sold by the central bank to the banks from July 01 to November 27, according to another BB official.
The market operators, however, said the demand for the US dollar is increasing gradually, mainly due to higher import payment pressure, particularly of petroleum products and capital machinery for power plants.
On November 19, the government revised its auction calendar, keeping an option for borrowing Tk 20 billion more on the same ground.
Under the revised calendar, the net borrowing from the banking system is set to reach Tk 30.42 billion by the end of November, compared with Tk 10.42 billion earlier.
The government may borrow the additional amount from the market by the end of this month through issuing bonds, according to the BB officials.
They also said the government has revised its auction calendar to meet immediate cash requirements ahead of the 11th national polls, scheduled to be held on December 30.
Currently, four treasury bills (T-bills) are being transacted through auctions to adjust the government's borrowings from the banking system.
The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
The T-bills are short-term investment tools issued through auctions, conducted by the central bank on behalf of the government.
Furthermore, five government bonds, with tenures of 02, 05, 10, 15 and 20 years, are traded on the market.
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