Treasury Bill Yields Slip Below 8% for the First Time Since 2023 as Bank Liquidity Piles Up

Bangladesh's Treasury bill yields slipped below 8% at auction on 11 October, the first time all three tenors have cleared that low since October 2023. The 91-day bill priced at 7.65%, the 182-day at 7.75%, and the 364-day at 7.89%, continuing a decline that has wiped out roughly 2 percentage points since February.

• All three Treasury bill tenors fell below 8% on 11 October for the first time in three years
• The 91-day yield dropped 48 basis points in a single week, from 8.13% on 4 October to 7.65%
• Excess bank liquidity has climbed past Tk408,000 crore, with banks parking surplus cash in government securities instead of lending it out
• Private sector credit growth has stayed below 5% for six straight months, a 33 year low by one recent reading

For a government that borrows heavily through these instruments, falling yields are unambiguously good news on the cost side. Every basis point shaved off the 91-day, 182-day, and 364-day rates lowers what the exchequer pays to roll over short-term debt. But the reason yields are falling is less comfortable: banks are drowning in cash they cannot find anyone to lend to, and Treasury bills have become the default parking spot for money that would otherwise sit idle.

A year of falling yields, not just a one week move

The 11 October reading is the latest point on a trend that has been building since the start of the year. In February, the 91-day bill was still pricing at 10.02%, having fallen from 10.42% in January. By early September, it had dropped further to 8.59%. A month later, on 4 October, it stood at 8.13%. The week-on-week move to 7.65% on 11 October extends a decline that has now run for the better part of a year without a meaningful reversal.

Why banks keep buying bills they don't need to

The driver, according to banking sector data, is a liquidity glut that has only deepened through the year. Surplus bank liquidity crossed Tk408,000 crore in June, the first time it passed that level, up from Tk337,000 crore just a month earlier and from Tk283,000 crore in June 2024. Deposit growth of 10.74% year on year has kept cash flowing into the banking system, while private sector credit growth has fallen to 4.47%, a reading one banking economist described as a 33 year low.

Agrani Bank PLC chairman Syed Abu Naser Bakhtiar Ahmed has pushed back on reading the liquidity surplus as banks sitting on piles of uninvested cash. Much of it, he said, is parked in government Treasury bills and bonds precisely because banks weighed down by bad loans see sovereign debt as the safer place to put money, safer than lending it to businesses. Md Arfan Ali, former president and CEO of Bank Asia PLC, has separately argued that interest rate cuts alone will not revive industrial investment, pointing to unreliable gas and power supply as a bigger deterrent to borrowing than the cost of credit itself.

"The surge in excess liquidity does not mean banks are holding uninvested physical cash in their vaults." , Syed Abu Naser Bakhtiar Ahmed, Chairman, Agrani Bank PLC

What it means for you

For the government, cheaper Treasury bill yields mean lower borrowing costs on the short end of the curve, which can ease pressure on the budget at a time when revenue collection is already falling short of targets. For savers, the read-through is less rosy: Treasury bill and bond yields often act as a benchmark for where banks eventually set fixed deposit rates, so a sustained slide toward and below 8% raises the odds that FDR rates drift lower too over the coming months, not higher. Anyone with a fixed deposit coming up for renewal may want to lock in current rates rather than wait, and can compare what banks are currently offering with BD Financial Review's FDR rate comparison tool.

For borrowers, the picture is more mixed. Cheaper government borrowing does not automatically translate into cheaper business loans while banks remain reluctant to lend against anything other than sovereign risk, and energy supply problems, not interest rates, appear to be the bigger obstacle to new investment right now. Anyone weighing a new loan despite that backdrop can model repayment scenarios with the EMI calculator before committing.