Staff Reporter :
Interest rates on treasury bills and bonds have risen sharply, reaching as high as 12 per cent, following the Bangladesh Bank’s discontinuation of its 28-day repo facility – a move that has tightened liquidity within the banking system and made financial institutions more cautious about investing in government securities.
According to recent data from the Bangladesh Bank, the yield on treasury bills rose to 12 per cent during the auction held on 29 June, up from 11 per cent in April. Meanwhile, the yield on five-year treasury bonds surged to 12.4 per cent in the 8 April auction, compared to 11.5 per cent in mid-March.
The central bank’s decision to phase out the 28-day repo facility-effective from 10 April-has significantly impacted short-term liquidity for banks. This facility previously allowed banks to access short-term funds from the central bank, and its removal has constrained their ability to invest in government debt instruments.
Concurrently, the government’s borrowing requirements have increased ahead of the close of the 2024-25 fiscal year. In response, yields have been raised to attract adequate investor interest.
On 29 June alone, the government borrowed approximately Tk 11,000 crore through 91-day, 182-day, and 364-day T-bills, at interest rates of 12.09 per cent, 12 per cent, and 12.03 per cent respectively.
In contrast, on 24 March, the same instruments fetched lower rates-10.90 per cent, 11.25 per cent, and 11.30 per cent-when the government raised Tk 6,652 crore.
Net government borrowing from the banking sector has climbed significantly in recent months. By the end of March in FY25, net borrowing reached Tk 51,982 crore-up sharply from Tk 26,225 crore recorded in the July-February period of the previous fiscal year.
This figure includes Tk 93,371 crore borrowed from scheduled banks, while repayments to the Bangladesh Bank amounted to Tk 41,388 crore-lower than nearly Tk 60,000 crore repaid in the first eight months of the past fiscal year.
In light of fiscal developments, the government has revised its bank borrowing target for FY25, lowering it to Tk 99,000 crore from the initial projection of Tk 1.37 lakh crore.
Treasury bills are typically used for short-term financing, while treasury bonds are issued for long-term funding requirements. Government borrowing from the banking system-both from the central bank and scheduled banks-is primarily conducted through these instruments.
As of the most recent auction in June, the weighted average yields on 2-year, 10-year, 15-year, and 20-year Bangladesh Government Treasury Bonds (BGTBs) stood at 12.29 per cent, 12.40 per cent, 12.29 per cent, and 12.49 per cent respectively.
