T bill-bonds promise profit
Staff Reporter :
Investing in Treasury bills and bonds are now becoming more profitable as the government’s debt has increased from the non-banking sector Instead of banks.
The interest rate of treasury bills and bond in Bangladesh has spiked in recent months making the Investment in treasury bills and bonds much more money-spinning than keeping money in commercial banks.
The yield of treasury bills now stands at a decade high of over 11 percent whereas it was 7 percent to 8 percent a few months back, showed Bangladesh Bank data.
Industry insiders said that the government is now facing a fund shortage, which prompted the rise in the yield rates of the treasury bills and bonds.
The banking sector is currently facing challenges due to increased distressed assets, particularly non-performing loans, and a slow deposit growth.
The excess liquidity in the banking sector dropped to Tk160,000 crore in October from Tk170,000 crore in September.
As a result, the government now relies heavily on alternative financing avenues like borrowing from non-banking domestic sources includes T-bills and bonds held by non-bank financial institutions, insurance firms, and private investors, as well as savings vehicles developed by the Directorate of National Savings, they added.
Moreover, the central bank has suspended printing money for the government since this fiscal year, which was another reason for the government having to borrow money from commercial banks and individuals.
In the previous FY23, the government borrowed Tk124,000 crore from the banking sector, with Tk98,826 crore borrowed from the central bank and Tk25,296 crore from the commercial banks.
The interest rate on the two-year Treasury bond exceeded 11 percent for the first time.
Last Wednesday, the interest rate of this bond was 11.60 percent. Likewise, the yield of the 91-day bills treasury bill was 11.15 percent in the auction held in Bangladesh Bank last Thursday, which was 6.75 percent in June last year.
Apart from this, the interest rate of 182-day Treasury bill has increased to 11.20 percent, which was 7.05 percent last June. Yield of 364-day treasury bills rose to 11.50 percent, which was 7.75 percent last June.
Meanwhile, to invest in treasury bills and bonds, separate accounts should be opened in banks and financial institutions. The bank or financial institution will buy the bill or bond on behalf of the individual.
Institutional investment in T-bills and bonds has also increased recently as interest rates have risen.
Addressing the recent propensity of individuals to invest in treasury bills and bonds, Syed Mahbubur Rahman, Managing Director and CEO of Mutual Trust Bank, said the interest rates of government’s treasury bills and bonds have continued to rise in recent times.
Under this circumstance, depositors were withdrawing money from banks and then investing in government treasury bills and bonds because the interest rates of the latter were over two percentage points higher than the deposit rate, he added.
