JASIM UDDIN HAROON | July 11, 2020
The yields on treasury bills slid in June last over the same period of a year earlier, according to Bangladesh Bank data.
The falling trend of the same was also continuing in this month of July amid fears that the profitability of banks would edge down.
The yields on all types of the bills dropped in June last compared to the same period a year ago.
However, the yields on three longer term bonds increased to some extent during the period while the remaining two debt securities declined.
People having direct knowledge at the commercial banks told the FE that the banks have flocked on the risk-free securities as the lending space shrunk in the country following the spread of coronavirus.
They said the banks have adequate fund invested in the treasury bonds, resulting in decline in the yields.
The central bank statistics showed that the total liquid assets with the commercial banks was recorded at Tk 3.041 trillion as of end March last against Tk. 2.72 trillion as of end June, 2019.
The private commercial banks have the largest portion of liquid assets as of end March last amounting to Tk. 1.47 trillion.
However, the yield on 91-day bill was recorded at 7.19 per cent in June, 2019. It dropped to 6.5 per cent in June, 2020.
Similarly, the yield of 182-day bill was 7.38 per cent in the same period in May, 2019 which was 6.77 per cent in June last.
The yield of 364-day bill in June last was recorded at 7.25 per cent against 7.39 per cent in the same period in 2019, statistics showed.
On bonds that mature in more than 364 days, the yields of two longer term bonds — 15 year and 20 year — dropped to 8.7 per cent and 8.94 per cent respectively in June last over June,2019.
The yield of 15-year bond was recorded at 8.9 per cent and 20-year at 9.3 per cent in June in 2019.
On the other hand, the yields on three bonds have increased in June last. The yield on 2-year bond was at 7.8 per cent in June last against 7.55 per cent a year earlier while the yield on 5-year bond was at 8.05 per cent against 8.1 per cent and the 10-year bond at 8.66 per cent over 8.44 per cent.
Heads of treasury at the commercial banks said that there are huge funds with the banks at present, following injection of funds by the central bank in the recent time.
Md Shaheen Iqbal, head of treasury and financial institutions at BRAC Bank, said the yields significantly came down due to sizable liquidity injection by Bangladesh Bank through various monetary measures.
The central bank has adopted many measures to supply money, including unconventional monetary policy like quantitative easing or QE, where Bangladesh Bank purchases longer term security from the market to increase money supply to the market.
Another official working at a private commercial bank said that the fall in the yields would affect the banks in terms of profitability. “We have a cost of fund and such drop is not a piece of good news for us,” he added.
He, however, said the foreign banks that collect fund at lower cost are the gainers on such investment.
In the meantime, the government borrowed Tk. 221.11 billion in June last through the bills and bonds. But in June 2019, the government borrowing was Tk. 281 billion.
