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The yields on long-term treasury bonds increased significantly on Tuesday as banks expressed unwillingness to invest their excess liquidity in the risk-free securities.
The cut-off yield, generally known as interest rate, on the 10-Year Bangladesh Government Treasury Bonds (BGTBs) rose to 12.28 per cent on the day from 11.88 per cent earlier, according to the auction results.
The yield on the 20-Year BGTBs reached at 12.44 per cent from previous 12.24 per cent.
"The yields on BGTBs have increased significantly due to the government's increased demand for funds ahead of the end of the outgoing fiscal year (FY) 2024-25," a senior official of the Bangladesh Bank (BB) told The Financial Express (FE) in response to a query.
The government has already exceeded the limits for ways-and-means advances (WMAs) and overdraft (OD) drawing facilities from the central bank on the same ground, the central banker explained.
Currently, the government is empowered to borrow up to Tk 120 billion from the BB under the WMAs to meet its day-to-day spending without issuing any securities.
In addition, it is entitled to borrow a maximum of Tk 120 billion through OD drawing facility from the central bank for the same purpose.
However, the government borrowed Tk 58.75 billion instead of pre-auction targeted Tk 50 billion on the day through issuing two-type of BGTBs to meet its budget deficit partially.
Currently, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
On the other hand, four 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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