T-bill yields drop as banks turn to risk-free investments

Yields on treasury bills (T-bills) dropped significantly on Sunday, as banks opted to park their excess liquidity in risk-free government instruments amid subdued private sector credit demand.

The cut-off yield, commonly referred to as the interest rate, on the 91-day T-bills fell to 11.58 per cent from 11.97 per cent, while the yield on 364-day T-bills declined to 11.25 per cent from 11.74 per cent.

Similarly, the yield on 182-day T-bills decreased to 11.25 per cent from the previous 11.96 per cent, according to the latest auction results.

"The yields on T-bills decreased due to lower government borrowing requirements in the first month of the current fiscal year (FY2025-26)," a senior official of the Bangladesh Bank (BB) told The Financial Express, explaining the current market dynamics.

He added that several banks are choosing to invest their surplus funds in government securities as credit demand from the private sector remains weak.

Private sector credit growth declined to 7.17 per cent year-on-year in May 2025, down from 7.50 per cent in April, reflecting falling business confidence and tighter lending conditions.

The central banker also anticipated that the current downward trend in T-bill yields may continue in the coming weeks.

Meanwhile, the government borrowed Tk 60 billion on the day by issuing three types of T-bills to partially finance its budget deficit.

At present, four types of T-bills-14-day, 91-day, 182-day, and 364-day-are issued through auction to manage the government's short-term borrowing needs from the banking system.

These bills serve as short-term investment tools, auctioned by the central bank on behalf of the government.

In addition to T-bills, five government bonds-with maturities of two, five, 10, 15, and 20 years-are also actively traded in the market.

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