The return on five-year Bangladesh Government Treasury Bonds (BGTBs) remained largely unchanged on Tuesday, reflecting a steady market environment. Analysts attribute the stability to the central bank’s ongoing efforts to maintain liquidity and the relatively stable exchange rate of the US dollar.
According to the latest Bangladesh Institute of Development (BID) auction data, the cut-off yield—considered the effective interest rate—on the five-year bonds inched up slightly to 10.32%, compared with 10.31% in the previous auction. Economists suggest that the marginal change is driven by a combination of sustained demand for low-risk government securities and ample liquidity in the financial system.
A senior official at Bangladesh Bank noted, “With private sector credit demand easing ahead of the national elections, many banks are channeling excess funds into government-approved securities.”
As part of its ongoing foreign exchange interventions, the central bank purchased a significant volume of US dollars from the interbank market, helping to sustain domestic liquidity levels. The official added that the inflow of remittances, coupled with these dollar purchases, has contributed to the relative stability of government bond yields.
On Tuesday, the government issued BDT 20 billion in bonds, partly to bridge the budget deficit. Several commercial banks participated in the auction, seeking safe investment avenues for their surplus liquidity.
Bangladesh Bank, in its routine open market operations, acquired USD 171 million from 11 commercial banks in the interbank market, a move aimed at supporting the stability of the Taka against the US dollar.
Summary of Tuesday’s Bond Auction and FX Intervention
| Instrument | Amount Raised (BDT) | Cut-off Yield (%) | Central Bank Dollar Purchase (USD million) | Comment |
|---|---|---|---|---|
| 5-year BGTB | 20,000,000,000 | 10.32 | 171 | Strong bidding amid limited private sector credit demand |
| Central Bank FX Intervention | – | – | 171 | Purchased from 11 banks to stabilise USD/BDT rate |
Market observers emphasise that monitoring liquidity flows and foreign exchange interventions in the run-up to the elections is crucial. Given adequate liquidity and cautious investor behaviour, significant short-term volatility in the government bond market appears unlikely.