Five-year bond yields slide on liquidity glut

The yield on five-year treasury bonds fell sharply on Tuesday as banks channelled excess liquidity into risk-free government securities amid weak private-sector credit demand ahead of the national election.

The cut-off yield-commonly referred to as the interest rate-on Bangladesh Government Treasury Bonds (BGTBs) declined to 10.31 per cent from 10.84 per cent at the previous auction, according to official results.

Despite the lower yield, the government borrowed Tk 30 billion through the issuance of BGTBs to partially meet its budget deficit.

"Most banks are parking excess liquidity in government securities as private-sector credit demand remains subdued ahead of the upcoming national polls," a senior treasury official at a leading private commercial bank told The Financial Express.

Private-sector credit growth stood at 6.58 per cent year-on-year in November 2025, up slightly from 6.23 per cent in October, according to the latest Bangladesh Bank data.

"Higher remittance inflows, coupled with the central bank's purchases of US dollars, have boosted market liquidity, putting downward pressure on yields of government securities," the banker said, adding that the current trend is likely to continue in the coming weeks.

At present, five government bonds with tenures of two, five, 10, 15 and 20 years are traded in the market.

In addition, four treasury bills - 14-day, 91-day, 182-day and 364-day - are auctioned regularly to manage the government's borrowing from the banking system.

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