Rise in issuance of T-bonds, bills pushes up yield curves

Net issuance of T-bonds up 300pc, T-bills 900pc in FY 19


JASIM UDDIN HAROON | Published: November 20, 2019 10:34:51 | Updated: November 22, 2019 12:15:30


Rise in issuance of T-bonds, bills pushes up yield curves

The increase in issuance of T-bonds and T-bills propelled their yield curves upward in last fiscal year (FY), 2018-19, according to the Bangladesh Bank (BB) statistics.

Yield curve has direct relationship with issuance of treasury securities at a given time. It also helps increase the yield rates of such securities in the market.

In FY 19, the government had borrowed more through issuance of treasury bills and bonds over the previous FY.

It means that the government had much appetite for funds for its budget implementation, experts told the FE.

The net issuance of T-bonds was Tk 198.64 billion in 2018-19, up by 300 per cent over the previous FY, according to the central bank.

On the other hand, the net worth of T-bills issued in FY 19 was Tk 177.31 billion, nearly 900 per cent higher than that of FY 18.

The BB officials told the FE that the primary market yield curves of T-bills and bonds are being widely used for valuation of the financial market instruments.

He said the rates of yields also increase when issuance of fresh securities surges in the market.

The cut-off yield of 2-year bond rose by over 51 per cent to 7.55 per cent (annualised), of five-year bond by 33 per cent to 8.10 per cent, of 10-year bond by 13 per cent to 8.44 per cent, of 15-year bond by 10 per cent to 8.9 per cent, and of 20-year bond by 4.35 per cent to 9.29 per cent, according to the BB statistics.

The statistics also showed that the cut-off yield of 91-day T-bills rose by 57 per cent to 7.19 per cent (annualised), 182-day bills by 61 per cent to 7.35 per cent, and 364-day bills by 48 per cent to 7.39 per cent.

In the meantime, bankers opined that the upward trend of T-bills and T-bonds is a good news for them, as many find it a good opportunity for investing their money.

They also said many hold these for selling in future. There are many financial market players, including the life insurance firms, which have to invest in the instruments.

Anis A Khan, managing director and CEO at the Mutual Trust Bank Limited, told the FE: "Such instruments are very safe from the bankers' perspective."

"We even hold these many times for future sales," Mr Khan said. Financial analysts often look at yield curves, as they may provide clues to financial market conditions and future interest rates with these.

"We use 91-day T-bills' interest rate as benchmark for the financial market," said the treasury head of a private commercial bank. "We need a vibrant secondary market for deepening the market and getting more accurate benchmark rates for the financial market," he added.

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