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The yield on five-year treasury bonds increased notably on Monday as banks held back from investing surplus funds in government securities, reflecting a cautious portfolio strategy amid geopolitical uncertainties.
The cut off yield, generally known as interest rate, on the Bangladesh Government Treasury Bonds (BGTBs) rose to 10.75 per cent on the day from 10.22 per cent earlier, according to auction results.
"Most banks are not interested in investing their excess funds in long-term government securities like BGTBs in order to manage their portfolios efficiently," a senior official of the Bangladesh Bank (BB) told The Financial Express (FE), while explaining the latest market situation.
He also said higher bank borrowing of the government has also pushed up the yield on the BGTBs.
On the day, the government raised Tk 30 billion by issuing the BGTBs to partially finance its budget deficit, the official said, adding that the previous borrowing figure was Tk 25 billion on the same ground.
The government's borrowing from the country's banking system normally rises in the final quarter of each fiscal year.
Currently, five government bonds, with tenures of two, five, 10, 15 and 20 years, are traded on the market.
Besides, four treasury bills (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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