Treasury bill yields drop again amid rising bank liquidity
According to Bangladesh Bank data, the central bank has purchased $5.39 billion from commercial banks through auctions in the current fiscal year
Treasury bill yields have declined again within a month as rising liquidity in the banking sector reduces pressure on government borrowing.
At the latest auction held today (22 February), yields on treasury bills dropped by 40 to 59 basis points compared with January, with rates falling across all three tenors.
The interest rates on 91-day treasury bills stood at 10.02%, down from 10.42% on 5 January. The 182-day bills were auctioned at 10.11%, compared with 10.54% in January, while the 364-day bills fell to 10.07% from 10.66%.
Treasury bills are short-term government securities sold for periods ranging from 91 to 364 days.
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Md Ezazul Islam, director general of the Bangladesh Institute of Bank Management, attributed the decline primarily to two factors.
He said the Bangladesh Bank has been purchasing foreign currency reserves from commercial banks through auctions, thereby injecting liquidity into the banking system.
"Because the central bank is buying dollars from commercial banks, money is flowing back to the banks, leaving them with ample liquidity," he said.
According to Bangladesh Bank data, the central bank has purchased $5.39 billion from commercial banks through auctions in the current fiscal year.
Ezazul added that slower growth in private sector credit was the second key reason behind the fall in yields, as banks now have surplus funds. Latest data from the Bangladesh Bank show that private sector credit growth stood at 6.10% in December.
A deputy managing director of a private bank said the "massive liquidity" in the banking sector has driven down treasury bill yields, noting that dollar purchases by the central bank have increased liquidity through banking channels.
He also pointed out that deposits in the banking sector have increased compared with earlier periods, further improving liquidity conditions.
Another senior official of a private bank said government borrowing has declined as implementation of the Annual Development Programme (ADP) remains slow.
In the first seven months (July-January) of the current 2025-26 fiscal year, ADP expenditure totalled Tk50,556.29 crore – the lowest in nine fiscal years. Spending has even fallen significantly compared with the period of political instability and government transition last year.
In September 2025, treasury bill yields had dipped below 10%. At that time, the interest rate on 10-year treasury bonds fell by 246 basis points within three months, marking the first time in two years that the rate dropped below the 10% threshold.
