Yields on BGTBs decline

The yield on two-year Bangladesh Government Treasury Bonds (BGTBs) dropped significantly on Tuesday as banks expressed increased interest in investing their excess liquidity in the securities.

The cut off yield, generally known as interest rate, on the BGTBs came down to 11.97 per cent on the day from 12.18 per cent earlier, according to auction results.

The government borrowed Tk 45 billion through issuing the BGTBs on the day to partially meet its budget deficit.

"Most banks are willing to invest their excess funds in BGTBs, as liquidity inflows are increasing in the market," a senior official of the Bangladesh Bank (BB) told The Financial Express (FE).

He also said higher inflow of remittances along with lower credit growth to the private sector have helped improve liquidity situation on the market.

Besides, the government borrowed Tk 5.0 billion on the day through issuing Three-Year Floating Rate Treasury Bonds (FRTBs).

The cut off yield on the FRTB fell to 12.94 per cent on the day from 13.15 per cent earlier.

The FRTB is a bond whose coupon is determined by adding spread with 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. This is a reference rate which is primarily used to set the rate of floating rate instruments of the government.

Currently, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, 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.

siddique.islam@gmail.com