Interest rates on Treasury bills and bonds have seen a reduction of 10 to 29 basis points, driven by heightened investment interest from banks.
As detailed on the Bangladesh Bank's website, a recent auction for government-backed five-year bonds attracted offers totalling Tk180 billion from banks.
Of this, Tk40 billion was successfully raised at an interest rate of 12.09%, down from the 12.38% observed in the previous auction on 6 January, marking a decline of 29 basis points.
Similarly, the rates for Treasury bills also experienced a downturn.
The auction on Monday saw the 91-day Treasury bills fetching Tk 35 billion at a rate of 11.34%.
Additionally, Tk20 billion was raised for the 181-day bills at an 11.68% interest rate, while another Tk20 billion was secured through the 364-day bills at 11.81%.
These short-term government-issued financial instruments, known for their low-risk profile, typically mature within a year and are open for purchase by both institutions and individuals. In recent years, commercial banks have increasingly channelled their surplus liquidity into these securities.
The auction on 6 January set the rates at 11.43% for 91-day bills, 11.80% for 182-day bills, and 11.95% for 364-day bills.
Interest rates for these instruments fluctuate based on the balance between the government's borrowing requirements and the banks' bidding amounts.
A senior official from Bangladesh Bank noted, "Deposit growth in banks remains subdued, yet financially robust banks are still attracting deposits. Banks with solid financial standing enjoy superior liquidity levels compared to others."
The official added that some banks are currently facing challenges, prompting customers to withdraw deposits and transfer their funds to more stable institutions, which in turn are investing in Treasury securities.
Another official highlighted the decline in private-sector lending, resulting in idle funds within banks.
Consequently, these banks are turning to Treasury bills and bonds for their favourable returns.
