Yield on Govt Bonds Surges as Banks Hold Back

The yield on five-year Bangladesh Government Treasury Bonds (BGTBs) jumped significantly on Tuesday, reflecting banks' growing reluctance to invest in government securities.

According to auction results from the Bangladesh Bank, the cut-off yield on the five-year BGTBs rose to 12.39 per cent, up from 11.48 per cent in the previous auction. The government raised Tk 35 billion through this issuance to help bridge the ongoing budget deficit.

In a parallel development, the government also borrowed Tk 5 billion by reissuing Three-Year Floating Rate Treasury Bonds (FRTBs). The cut-off yield on these bonds increased to 13.15 per cent from 12.49 per cent.

A senior Bangladesh Bank official noted that the previous FRTB auction, held last Tuesday, had to be cancelled due to a technical issue.

The FRTB's coupon rate is determined by adding a spread to the benchmark 91-day Bangladesh Compounded Rate (BCR)—a daily reference rate derived from the cut-off yields of 91-day Treasury Bills. This rate is used as a benchmark for floating-rate government instruments.

Currently, five types of government bonds—ranging in tenures from two to 20 years—are available in the market. In addition, four types of Treasury Bills (T-bills), with maturities of 14, 91, 182, and 364 days, are auctioned regularly to manage short-term government borrowing.