The yields from both government treasury bills and bonds started to rise from April after more than two years, ending frustrations of banks concerned.

People familiar with the development said the government borrowing began rising in recent months leading to hike in the yields.

The government had been borrowing much less since August last. But in recent months, the amount is rising gradually. It borrowed on an average Tk 13.50 billion on each bid held weekly on three short-term bills in April last. It borrowed on an average Tk 7.0 billion as long-term bonds in the same month.

The bills usually comprise three short-term borrowing instruments and the auction is held on Sundays.

As per the auction calendar, the government borrowing is expected to reach Tk 9.0 billion from bills this May while bonds may rise to more than Tk 8.0 billion.

In June as per the calendar, the borrowing will rise further.

There is speculation that the government borrowing may rise fast in June on the back of poor revenue mobilisation this year.

However, the weighted average yield on 91-Day, 182-Day and 364- Day Treasury Bills increased to 3.30 per cent, 4.43 per cent and 4.80 per cent respectively in April (up to third week), 2016 compared to their immediate previous yields, according to central bank data.

The weighted average yield on 2-Year BGTB, 5-Year BGTB and 10-Year BGTB increased to 5.25 per cent, 6.16 per cent and 6.91 per cent respectively in April (up to third week ), 2016 from the corresponding yields of the earlier month.

The yields both on bonds and bills fell up to March last.

Sources in the primary dealer banks told the FE that the yields on the government treasury instruments had been on the decline since January 2014.

A senior dealer working at the Primary Dealers Association of Bangladesh, the apex group of 12 primary dealers, said this might be a government strategy to keep the government bills and bonds attractive amid the banks' idle funds.

Bangladesh now has actually 20 primary dealers but eight remained outside the PDBL.

The primary dealer banks are believed to have much bills and bonds to meet the demands from the different potential buyers.

There is a need for investing 19 per cent on the banks' SLR (statutory liquidity ratio) in bonds. Apart from this, life insurance has to maintain a particular fund as government security.

There is no restriction on falls with its immediate past bids. But there is a restriction in case of rising yields on 10 basis points with its last auction.

Nurul Amin, managing director and CEO at the Meghna Bank told the FE: "The borrowing is rising and for this reason, the yield has been increasing."

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Source: The Financial Express