Bangladesh’s treasury-bill yields fell below 9 per cent across all maturities on Sunday, extending a sharp decline in government borrowing costs as banks with surplus liquidity seek safer investment opportunities amid weak private-sector credit demand.
The yield on the 91-day treasury bill fell to 8.7289 per cent from 8.8290 per cent at the previous auction. The average yield was 8.6850 per cent, with around 29 per cent of applications receiving pro-rata allotments.
The 182-day bill yield dropped to 8.8199 per cent from 8.9200 per cent, with an average yield of 8.7613 per cent. Around 73 per cent of applications received pro-rata allotments.
The 364-day bill yield declined to 8.8901 per cent from 9.0700 per cent, with an average yield of 8.8510 per cent. Pro-rata allotments were around 100 per cent of applications.
The latest decline extends a broad repricing across the government securities market. Yields on 15-year and 20-year treasury bonds also fell to around 9.10 per cent at the 25 August auction, reaching their lowest levels in roughly three years.
The 20-year bond yield fell to 9.1275 per cent from 10.4000 per cent at the previous auction on 29 July, while the 15-year yield declined to 9.0975 per cent from 10.3425 per cent.
The shift marks a sharp reversal from the high-interest-rate environment of the past two years. The 91-day bill yield had climbed to 12.10 per cent in June 2025, while 182-day and 364-day bills reached 12.11 per cent and 12.24 per cent, respectively.
The main force behind the decline is excess liquidity in the banking system, especially within strong banks, coupled with weak private-sector credit demand. With fewer attractive lending opportunities, banks are directing more surplus funds into government securities, pushing yields lower.
“Banks are preferring to buy treasury securities, causing yields to drop much below the policy rate,” said Asif Khan, chairman of Edge Asset Management.
The decline has also followed Bangladesh Bank’s 50-basis-point cut in its policy rate to 9.5 per cent last month. Market participants expect further monetary easing if inflation continues to moderate.
“The market has liquidity and there are limited investment opportunities, so this reaction is natural,” said Sheikh Mohammad Rashedul Hasan, managing director and CEO of UCB Asset Management.
He said the yield curve is shifting downward as investors adjust to changing monetary conditions.
The falling yields are reducing the government’s cost of borrowing across both short- and long-term maturities.
For banks, the shift also reflects a change in how surplus liquidity is being deployed as demand for private-sector loans remains subdued.
The key question now is whether the downward move in yields will continue across maturities.
Further monetary easing, continued excess liquidity and weak credit demand could keep pressure on yields, while a revival in private-sector borrowing could eventually absorb some of the surplus funds.
