Yields on treasury bills fell below 8% in today’s (11 October) auction for the first time since October 2023, as excess liquidity in the banking sector and weak private-sector credit demand drove down the government’s short-term borrowing costs to their lowest levels in nearly three years.
Treasury bill yields last fell below 8% in October 2023, after which interest rates on Treasury bills and bonds continued to rise.
In the latest auction held today, yields on 91-day, 182-day and 364-day Treasury bills fell below 8%, marking a notable development as yields across all three tenors dropped below the threshold simultaneously.
According to Bangladesh Bank data, the yield on 91-day Treasury bills declined to 7.65%, while those on 182-day and 364-day bills fell to 7.75% and 7.89%, respectively.
On 2 October 2023, yields on the 91-day, 182-day and 364-day Treasury bills stood at 7.45%, 7.60% and 8.25%, respectively.
At the auction held on 4 October this year, the yield on the relevant Treasury bills stood at 8.13%. The latest figures indicate a decline of 48 basis points in the yield over just one week.
Earlier, at the 6 September auction, yields on 91-day, 182-day and 364-day Treasury bills stood at 8.59%, 8.65% and 8.73%, respectively. Although yields declined in several subsequent auctions, the 11 October auction marked the first time in the recent series that all three tenors fell below 8%.
Treasury bills are one of the government’s key instruments for raising short-term funds. Lower yields can reduce government borrowing costs, while excess liquidity in banks can increase demand for government securities.
Private-sector credit growth has remained below 5% for six consecutive months, reflecting subdued demand for bank loans.
Meanwhile, surplus liquidity in the banking sector surged 45% over the past year to exceed Tk4 lakh crore, according to a central bank report. However, the vast majority of these funds have been parked in government Treasury bills and bonds rather than flowing into private-sector lending.
https://www.tbsnews.net/economy/banking/excess-liquidity-weak-credit-demand-push-treasury-bill-yields-below-8-1569656
