Yields on Treasury bills (T-bills) showed a mixed trend on Sunday as banks increasingly diverted excess liquidity into short-term government securities, reflecting heightened caution ahead of the upcoming national election. The move signals a clear preference among banks for lower-risk, shorter-maturity investments amid political and economic uncertainty.

According to auction results released by Bangladesh Bank, the cut-off yield on the 91-day T-bill declined to 9.69%, down from 9.91% previously. In contrast, the 182-day T-bill yield rose to 9.89% from 9.79%, while the 364-day T-bill yield edged up slightly to 9.70% from 9.68%. On the day, the government raised Tk 65 billion through the issuance of three types of T-bills to help finance its ongoing budget deficit.

“Most banks are opting to invest their excess liquidity in shorter-tenure instruments rather than longer-term ones, reflecting cautious portfolio positioning ahead of the national election,” a senior official of Bangladesh Bank told The Financial Express.

The central bank official added that the current trend in government securities yields is likely to persist in the coming weeks, given the political and economic environment.

This cautious approach isn’t new. On September 28, yields on T-bills had already fallen below the central bank’s policy rate as banks sought safer avenues for their surplus funds amid sluggish private sector credit demand. At that time, the yield on the 91-day T-bill dropped to 9.91% from 10.00%, the 182-day to 9.79% from 9.91%, and the 364-day to 9.68% from 9.88%.

Currently, the policy rate (repo rate) of Bangladesh Bank stands at 10%.

Meanwhile, private sector credit growth continues to remain weak. As of July 2025, credit growth was recorded at 6.52% year-on-year, marginally up from 6.49% in June. The subdued growth reflects ongoing challenges in business confidence and a tight credit environment leading up to the election.

At present, the government auctions four types of Treasury bills with maturity periods of 14, 91, 182, and 364 days to manage its borrowing from the banking system. In addition, five types of government bonds with maturities of 2, 5, 10, 15, and 20 years are also traded in the domestic market.

As the election approaches, market analysts expect banks to remain conservative in their investment strategies, favoring liquidity and short-term stability over longer-term risk exposure.