Yields on Bangladesh’s 10-year Treasury bonds declined further on Tuesday as banks continued to channel surplus liquidity into government securities amid sluggish private sector credit growth and improved market conditions.

The cut-off yield, commonly referred to as the interest rate, on Bangladesh Government Treasury Bonds (BGTBs) dropped to 10.37 per cent, down from 10.49 per cent at the previous auction, according to official results.

Earlier, on January 20, the yield on the 10-year BGTBs had already fallen to 10.49 per cent from 10.87 per cent, driven by similar market factors.

A senior official of Bangladesh Bank (BB) said most banks are opting to invest their excess liquidity in government securities as demand for private sector loans remains weak following the recently concluded national election and lingering political uncertainty.

He also noted that increased remittance inflows and the central bank’s purchase of US dollars have boosted liquidity in the banking system, exerting downward pressure on yields of government securities.

On Tuesday, the government raised Tk 20 billion through the issuance of BGTBs to partly finance its budget deficit.

At present, five government bonds with tenures of two, five, 10, 15 and 20 years are traded in the market.

In addition, four treasury bills (T-bills) with maturities of 14 days, 91 days, 182 days and 364 days are regularly auctioned to manage the government’s short-term borrowing from the banking system.