B Mirror Report: Due to sluggish demand and banks’ reluctance to invest excess cash in government securities, the yield on two-year Bangladesh Government Treasury Bonds (BGTBs) rose on Tuesday.

The cut-off yield, sometimes referred to as the interest rate, increased to 10.73 percent from 10.23 percent in the prior auction, according to the auction data.
According to market participants, banks are choosing shorter-tenure government instruments over longer-dated bonds and are becoming more careful when allocating excess liquidity.

“Most banks prefer to invest their surplus liquidity in short-term securities rather than longer bonds to manage their portfolios more efficiently,” a senior treasury official of a private commercial bank told The Financial Express, adding that the current upward trend in yields may continue in the near term.

On the same day, the government raised Tk 40 billion through the issuance of BGTBs to help finance its budget deficit.

It also borrowed Tk 5.0 billion by issuing three-year floating rate treasury bonds (FRTBs), where the cut-off yield climbed to 10.82 per cent from 10.60 per cent earlier.

The FRTB rate is determined by adding a spread to the benchmark 91-day Bangladesh Compounded Rate (BCR), which is derived from treasury bill auction yields.

Currently, Bangladesh trades five types of government bonds with maturities ranging from two to 20 years, along with treasury bills of 14, 91, 182, and 364 days used for short-term borrowing adjustments.