Treasury bill yields fall below 10% amid rising banking liquidity
The decline reflects a surge in liquidity across the banking system
Treasury bill yields for all three tenures fell below the policy rate today (1 March) as liquidity in the banking sector improved significantly.
The yields on 91-day, 182-day, and 364-day treasury bills dropped to 9.90%, 9.98%, and 9.93%, respectively, according to the latest auction results. Just a week earlier, the yields stood above 10%, with the 91-day bill at 10.02%, the 182-day bill at 10.11%, and the 364-day bill at 10.07%.
Treasury bills are short-term government debt instruments issued for periods ranging from 91 days to 364 days.
Keep updated, follow The Business Standard's Google news channel
The decline reflects a surge in liquidity across the banking system. Call money rates have also dropped by around 40 basis points between January and March this year.
Mohammad Ezazul Islam, director general of the Bangladesh Institute of Bank Management, said the fall in yields was mainly driven by two factors.
"The central bank has been purchasing foreign exchange reserves from commercial banks through auctions. As a result, liquidity has flowed back into the banking system," he said.
According to Bangladesh Bank data, the central bank has purchased $5.39 billion from commercial banks through auctions so far in the current fiscal year.
Ezazul Islam added that slower private sector credit growth was another major reason behind the increased liquidity.
Bangladesh Bank's latest data shows private sector credit growth stood at 6.03% in January.
A deputy managing director of a private bank said the "excess liquidity" in the banking sector has pushed treasury bill yields lower, noting that central bank dollar purchases have injected additional funds into the banking channel.
He also said deposit growth has strengthened liquidity conditions, as rising deposits increase banks' available funds.
Another deputy managing director said government borrowing demand has declined recently, partly due to slow implementation of the Annual Development Programme (ADP), further contributing to the fall in treasury bill yields.
