The auction of treasury bills (T-bills) and bonds resumed, after a month's suspension, to partly finance government budget deficit likely at higher expense now.
Officials said the government is set to borrow Tk 33 billion through holding the auction of T-bills and Bangladesh Government Treasury Bonds (BGTBs) in the current month.
According to the Bangladesh Bank (BB) officials, the first auction for March of Two-Year BGTBs will be held at the central bank headquarters in Dhaka today (Tuesday) to raise Tk 7.0 billion.
"Yields on the government securities, particularly the BGTBs, may rise in the coming days following higher cost of funds," a senior treasury official of a leading private commercial bank told the FE.
He wouldn't elaborate on the current money-market situation, though it is obvious that cost of mobilising funds is on the upturn amid cash crunch.
On the other hand, the government is set to inject Tk 63.50 billion into the market through making payments against maturity of its T-bills and bonds during the period under review, the BB official added.
"Net injection of funds in the market will stand at Tk 30.50 billion by the end of this month after deduction of gross borrowings worth Tk 33 billion," a BB senior official told the FE.
The government's latest move came against the backdrop of holding some excess liquidity recently, the central banker explained.
Currently, the government is holding around Tk 15 billion in excess liquidity in its accounts.
The government had suspended the auctions of both T-bills and BGTBs for the month of February last to use up its excess liquidity.
"Higher sales of savings instruments have pushed up the excess-liquidity balance that have also helped the government lessen its borrowing from the banking system," another central banker said.
Slower implementation of projects under the Annual Development Programme (ADP) has also helped the government go on borrowing smaller amounts of funds from the banking system, he added.
The government's net bank borrowing is still at a negative level, amounting to Tk 153.82 billion as on February 25, mainly due to higher growth in the saving-certificate sales, according to the central bank's confidential report.
Meanwhile, the government had set a bank-borrowing target of Tk 282.03 billion for the ongoing fiscal year (FY) for part- financing of the budget deficit.
Under the proposed bank borrowing, the government will borrow Tk 208.87 billion through issuing long-term bonds while the remaining Tk 73.16 billion through T-bills.
Currently, four T-bills are transacted through auction to adjust government borrowings from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
The bills are short-term investment tools issued through auction, conducted by the central bank on behalf of the government.
Furthermore, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
