The yields on government securities (G-Sec) continued to fall in the recent days as the banks were showing increased interest to invest their excess funds in the risk-free instruments.
Lower government borrowing from the banking system has also contributed to pushing down the yields, according to senior bankers.
On Tuesday, the yield on Five-Year Bangladesh Government Treasury Bonds (BGTBs) fell significantly on the same ground.
The cut off yield, generally known as interest rate, on Five-Year BGTBs came down to 5.75 per cent on the day from 6.47 per cent earlier, according to Bangladesh Bank (BB). The yield fell below the inflation rate on point-to-point basis in December 2021.
The inflation as measured by consumer price index (CPI) rose to 6.05 per cent in December last calendar year from 5.98 per cent a month ago on point-to-point basis because of higher prices both food and non-food items.
However, the government borrowed Tk 5.0 billion on Tuesday through issuing the BGTBs to meet its budget deficit partly.
Besides, the yields on G-Sec have also dropped in earlier two auctions of this month, the bankers said.
Earlier on February 01, the yield on Two-Year BGTBs fell to 4.25 per cent on the day from 4.71 per cent earlier, according to market operators.
On the other hand, the yield on 91-Day Treasury Bills (T-bills) dropped to 2.21 per cent on February 06 from 2.37 per cent earlier while the yield on 364-Day T-bills came down to 3.39 per cent from 3.45 per cent.
Talking to the FE, Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank Limited, said the existing trend of G-Sec may continue with the current market situation.
"The yields on G-Sec are falling continuously mainly due to lower bank borrowing of the government," treasury head at a leading private commercial bank (PCB) told the FE while replying to a query.
The Ministry of Finance (MoF) has already set zero net bank-borrowing target for the month of February as the government account maintained a surplus position in the recent days.
"Higher revenue collection along with issuing of the Shariah-based Sukuk bonds has helped boost liquidity in the government account recently," a government official explained.
Currently, three T-bills are transacted through auctions to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years are traded on the money market.
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