Yield on 2-yr BGTBs falls

The yield on two-year Bangladesh Government Treasury Bonds (BGTBs) dropped significantly on Tuesday as banks showed increased willingness to invest their excess liquidity in risk-free securities.

The cut-off yield, generally known as the interest rate, on the BGTBs declined to 11.60 per cent on the day, down from 12.29 per cent previously, according to auction results.

Despite setting a pre-auction target of Tk 35 billion, the government ultimately borrowed Tk 41.40 billion through the issuance of BGTBs to partially finance its budget deficit.

"Some banks have shown interest in investing their excess funds in government securities as liquidity inflows rise in the market," a senior official at a leading private commercial bank (PCB) told The Financial Express (FE).

The treasury official also predicted that the current trend in BGTB yields may persist in the coming weeks.

In addition, the government borrowed Tk 5.0 billion on the same day by issuing three-year Floating Rate Treasury Bonds (FRTBs). The cut-off yield on the FRTBs also fell-to 12.92 per cent from 13.19 per cent earlier.

An FRTB is a bond whose coupon rate is determined by adding a spread to the benchmark 91-day Bangladesh Compounded Rate (BCR).

The BCR is a daily rate based on the cut-off yield of 91-day Treasury Bills (T-bills) auction, serving as a reference rate for setting yields on government floating rate instruments.

Currently, five types of government bonds-of two, five, 10, 15, and 20-year tenures-are traded in the market.

Additionally, four T-bills are auctioned to help the government manage its borrowing needs from the banking system. These T-bills have maturity periods of 14, 91, 182, and 364 days, respectively.

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