T-bill yields fall

The Bangladesh Treasury Bill (T-bill) yields fell on Sunday, as banks shown interest in the risk-free government securities.

The yield of the 91-day T-bill dropped by 10 basis points to 7.25 per cent on the day, while the 182-day T-Bill declined to 7.48 per cent, also down by 10 basis points.

Treasury yield is the effective annual interest rate that the government pays on one of its debt obligations, expressed as a percentage.

However, there is no "devolvement" by the central bank from the target of Tk 250 billion from the 91-day bills on the day.

Devolvement is the process through which the Bangladesh Bank (BB) purchases the government securities in absence of bids submitted by commercial banks.

The BB purchases 182-day securities worth Tk 5.1 billion from the target amount of Tk 15.0 billion. The commercial banks purchased Tk 9.9 billion from the 182-day bills.

Such development in the treasury market means liquidity in the money market has surged. The relationship between liquidity and yield rate is negative, or when the former rises the latter falls.

Bankers said liquidity increased to some extent, which was revealed through the auction outcome.

"The development means that liquidity is gradually rising in the money market," a senior treasury official of a private sector commercial bank said on the day.

Some banks might purchase the bills to meet their other requirements relating to BASEL III, he noted.

The banks maintain cash through SLR (statutory liquidity ratio) and money in the vaults. The SLR is usually maintained through the government securities and other central bank-approved securities.

When the bills and bonds mature, the banks need to purchase again to maintain SLR, said bankers.

Md. Mezbaul Hoque, BB executive director and spokesperson, told the FE that this initially means liquidity is rising.

He said the banks also buy when the previously-held bills and bonds mature.

Through the T-bills and bonds, the government borrows from the banking system. The yield rate is the benchmark rate - used in the financial market to determine the rate for other instruments in the banking industry.

Currently, Bangladesh has three bills - 91-day, 182-day and 364-day - as well as five bonds - 2-year, 5-year, 10-year, 15-year and 20-year.

The government has a target to borrow Tk 1.06 trillion from the banking system in the current fiscal year, 2022-23.

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