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The yield on Bangladesh's two-year treasury bonds dropped below the central bank's policy rate on Tuesday, as banks continued shifting excess liquidity into government securities amid sluggish private credit demand ahead of the national election.
The move reflects a cautious market sentiment and limited lending appetite in the private sector.
The yield on the Bangladesh Government Treasury Bonds (BGTBs) fell to 9.44 per cent from 10.17 per cent, according to the auction results published on Tuesday.
In contrast, the Bangladesh Bank's (BB policy rate, or repo rate, currently stands at 10 per cent.
A similar trend was seen earlier on September 2, when the yield slipped to 10.17 per cent from 10.24 per cent, as banks continued favouring low-risk government securities over private lending.
On Tuesday, the government raised Tk 35 billion through the issuance of BGTBs to help finance part of its budget deficit.
"Most banks prefer to invest their excess funds in government-approved securities, mainly because of subdued private sector credit demand ahead of the national election," a senior BB official told The Financial Express, explaining the current market dynamics.
Private sector credit growth remained weak, rising marginally to 6.52 per cent year-on-year in July 2025, up from 6.49 per cent in June.
The slight increase suggests lingering business uncertainty and tight lending conditions.
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