In the run-up to the national elections, yields on Bangladesh’s Treasury bills (T-bills) declined on Sunday, reflecting banks’ preference for low-risk government securities amid excess liquidity. With private sector credit demand subdued, financial institutions are increasingly channeling surplus funds into risk-free instruments, prioritising security over returns.
The latest auction results from Bangladesh Bank reveal that the cut-off yields across all maturities edged down slightly. The 91-day T-bill yield fell from 10.40% to 10.24%, while the 182-day instrument declined from 10.34% to 10.28%. The most notable decrease occurred in the 364-day T-bill, which dropped from 10.49% to 10.34%.
Through these auctions, the government raised a total of BDT 75,000 crore, a portion of which will help bridge the national budget deficit. Analysts interpret the modest fall in yields as an indicator of strong demand for government securities, driven by cautious lending behaviour among banks and limited credit appetite in the private sector.
The recent auction outcomes are summarised in the following table:
| T-Bill Maturity | Previous Yield (%) | Current Yield (%) | Change (bps) | Amount Raised (Trillion BDT) |
|---|---|---|---|---|
| 91 days | 10.40 | 10.24 | -16 | 25 |
| 182 days | 10.34 | 10.28 | -6 | 25 |
| 364 days | 10.49 | 10.34 | -15 | 25 |
A senior Bangladesh Bank official commented, “Banks are seeking safe and liquid avenues to deploy their excess funds. Treasury bills provide a secure and readily accessible option, especially as private sector credit demand remains tepid ahead of elections.”
Economists suggest that the current abundance of liquidity will likely keep T-bill yields subdued in the near term, particularly if the political environment continues to constrain private credit demand. Moreover, short-term yield movements may be influenced by the central bank’s monetary operations, including repo and reverse repo transactions, with market participants closely monitoring policy signals during the election period.
Market observers note that the decline in long-term T-bill yields signals expectations of stable inflation and reduced risk premiums, providing a pre-determined investment path for risk-sensitive financial institutions. The reliance on T-bills to finance government deficits, combined with their appeal as a safe investment channel for banks, underscores their pivotal role in Bangladesh’s economic landscape.