The treasury yields have fallen sharply in recent months, lowered by adequate liquidity in the money market.
The yield on the 91-day bill went down from 6.5 per cent (annualised) in June to 0.65 per cent in December.
The yield on the 120-day bill is now 1.25 per cent, down by 5.52 percentage points in June, according to the central bank data compiled by the FE.
The data shows that the yield on the 364-day bill in the year's last auction was 2.07 per cent, which was 7.25 per cent in June 2020.
The slim yield is likely to influence the lending rates on the market as many consider treasury bills to be the benchmarks for setting lending rates.
Adequate liquidity in the money market means that authorised dealers who purchase treasury bills and bonds through auctions are competing with each other by offering or accepting lower rates.
Such instruments are safe for investment as these are risk-free, with the government rarely defaulting.
Similarly, the yield on a bond that is usually long-term in nature also dropped significantly.
The yield on the two-year bond is now 3.71 per cent against 7.8 per cent in June 2020.
The yield on the five-year bond almost halved, in its latest auction in December, to 4.64 per cent.
The 10-year bond also fell to 5.81 per cent in December against 8.66 per cent in June last.
No auctions have been held for the 15-year bond and 20-year bonds in December.
The government borrowing from the instruments also fell significantly during the period.
The government borrowed a total of Tk. 230 billion from the bills and bonds in June last.
But the borrowing dropped to Tk 105 billion in December from Tk 151 billion in September last. The volume of borrowing was Tk 180 billion in November, according to the Bangladesh Bank (BB).
Treasury officials of different banks told the FE that the money market has huge liquidity and they are competing for purchasing the government instruments by offering lower rates leading to the fall in the yields.
They also said that during the pandemic, there is less scope for investing in the fund.
Md. Shaheen Iqbal, head of treasury at the privately-owned BRAC Bank, told the FE that the falloff is due to the adequate liquidity in the market.
He, however, said the government had less appetite for borrowing as the development expenditure is in the slow lane.
The government is spending less than expected considering the looming second wave of COVID-19 across the country. The first virus case was reported in March.
The optimism over the vaccine import in January next may boost the economic activity and development expenditure, the executives say.
Sk. Matiur Rahman, head of treasury at Prime Bank, said that the scope for investing money has been squeezed in the pandemic.
"PDs and even non-PDs were aggressive to invest," Mr. Rahman said.
The total liquid asset with the banks at the end of September last was Tk 3.72 trillion. It was Tk 3.36 trillion at the end of June last. The minimum required liquid asset with the banks was Tk. 2.02 trillion at the end of September last, according to BB.
