Bangladesh
3 years ago

Yields on treasury bills drop

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The yield on treasury bills (T-bills) dropped further on Sunday as the commercial banks having excess liquidity rushed to offer bids in the auction due to the ongoing lockdown, bankers said.

The cut-off yield, generally known as interest rate, on the 91-day T-bill fell to 0.55 per cent on the day from 0.70 per cent of the previous auction, held on April 05, according to the auction results.

Besides, such yield on 364-day T-bill came down to 1.54 per cent from 1.75 per cent of the previous auction, held on April 12.

The government borrowed Tk 17 billion through issuing the T-bills on Sunday to partly meet its budget deficit, according to the central bank officials.

Cancellation of some auctions in the last week of March and second week of April along with the lockdown has pushed down the yield on T-bills, they explained.

"The cut-off yields have been fixed in line with the market requirement," a senior official of the Bangladesh Bank (BB) told the FE while replying to a query.

He said the demand for the T-bills increased significantly as the banks preferred to invest their funds in the securities mainly due to the lockdown.

Actually, the cut-off as well as the weighted average yield on T-bills started falling since May 2020 just more than one month after the coronavirus outbreak in Bangladesh. Such a falling trend was continuing until February 2021, the data showed.

Bankers feared that the falling trend in yields on T-bills might continue in the coming months if the second wave of the pandemic continues.

"Most of the commercial banks have quoted lower interest rates to invest their excess liquidity in the risk-free government-approved securities mainly due to lack of alternative investment opportunities," Sk. Matiur Rahman, head of treasury division at the Prime Bank Limited, told the FE while replying to a query.

Meanwhile, the excess liquidity with all the scheduled banks almost doubled in January 2021 as significantly lower private credit growth indicates a slower investment situation in Bangladesh.

The surplus liquidity grew by more than 97 per cent to Tk 2,040.56 billion as on January 31, 2021 from Tk 1,035.58 billion a year before, according to the central bank's latest statistics. It was Tk 2,047.18 billion as on December 31, 2020.

Actually, most of the banks are now forced to invest more in the securities mainly due to lower credit demand for both public and private sectors because of the ongoing pandemic, another senior treasury official of a leading private commercial bank explained.

Currently, three T-bills are being transacted through auctions to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.

Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years are traded in the money market.

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