As Bangladesh prepares for its upcoming national elections, yields on Treasury Bills (T-bills) have witnessed a notable decline, reflecting shifting liquidity conditions and cautious investor sentiment. Financial institutions are increasingly directing surplus funds into risk-free government securities amid subdued demand for private-sector credit. Investors are prioritising capital preservation and stability in the face of impending political uncertainty.
According to recent auction results released by Bangladesh Bank, cut-off yields across all tenors of T-bills edged lower. The 91-day instrument dropped from 10.40% to 10.24%, the 182-day bill declined from 10.34% to 10.28%, while the 364-day T-bill saw the largest fall, from 10.49% to 10.34%.
Through this auction, the government mobilised a total of BDT 75,000 crore, part of which will be deployed to cover the national budget deficit. Analysts suggest that the modest reduction in yields primarily reflects strong demand for government securities by banks, driven by muted private-sector borrowing in the pre-election period.
The auction outcomes are summarised below:
| T-Bill Tenor | Previous Yield (%) | Current Yield (%) | Change (bps) | Funds Raised (BDT trillion) |
|---|---|---|---|---|
| 91 days | 10.40 | 10.24 | -16 | 0.25 |
| 182 days | 10.34 | 10.28 | -6 | 0.25 |
| 364 days | 10.49 | 10.34 | -15 | 0.25 |
A senior official at Bangladesh Bank commented, “Banks are seeking avenues to invest excess funds safely and with liquidity. T-bills provide a secure and readily accessible option, particularly as private-sector credit demand softens ahead of the elections.”
Economists note that the current abundance of liquidity is likely to maintain downward pressure on T-bill yields in the near term. Central bank operations, including repo and reverse repo transactions, as well as policy signals during the election period, may influence short-term interest rates.
Market observers also highlight that the fall in long-term T-bill yields indicates expectations of stable inflation and reduced risk premiums. For banks and risk-sensitive financial institutions, T-bills offer a pre-defined, low-risk investment pathway. The government’s reliance on T-bills to finance fiscal deficits, coupled with their role as a risk-free channel for institutional funds, underscores their strategic importance in Bangladesh’s financial landscape.
