With Tk 8,080cr surplus, govt squeezes T-bill, bond sales [ Tritiyo Matra News ]

With Tk 8,080cr surplus, govt squeezes T-bill, bond sales

Local August 22, 2016

Rates of interest on the government treasury bills and bonds decreased sharply in recent months due to a lower demand for borrowing through the instruments from the government which is now facing a surplus amount of Tk 8,080 crore in its account.
Country’s scheduled banks rushed to invest their excess liquidity in the government tools amid slow credit demand due to a sluggish business situation in the country, but they received lower rates of interest from the T-bills and bonds.
A BB official told New Age on Sunday that the net government borrowing from the banking sector would remain negative in August this year as the government would repay more than the borrowing from the banks.
The net repayment of the government to the banks will stand at Tk 1,500 crore in August, according to the central bank’s auction calendar.
The BB data showed that rates of interest on all types of T-bills and bonds dropped in recent months as most of the banks submitted bids worth huge amount of money at the central bank’s auction for the government tools to invest their idle fund in the instruments.
But, the government is now accepting a limited amount of bids due to the surplus amount in its account.
The surplus amount in the government account stood at Tk 4,788 crore on August 1, Tk 6,684 crore on August 14, Tk 7,150 crore on August 16 and Tk 8,080 crore on August 17, according to finance ministry data.
The BB official said that the government faced the surplus amount in its account as the net investment in the national savings certificates and bonds hit a fresh record at Tk 33,688.60 crore in the fiscal year of 2015-16.
The clients invested heavily in the savings tools due to lower rates of interest on deposit products of the scheduled banks, he said.
The interest rate on T-bill of 91-day stood at 3.39 per cent on August 16, 2016 against 5.55 per cent on August 10, 2015.
Scheduled banks submitted bids amounting to Tk 2,123.75 crore in the latest auction for 91-day T-bill, but the government accepted bids worth Tk 500 crore in line with its auction calendar.
The banks submitted bids amounting to Tk 2,768 crore in the auction for 182-day T-bill against the government’s target of Tk 875 crore.
The interest rate on the T-bill of 364-day decreased to 5.94 per cent on July 25, 2016 against 6.75 per cent on July 13, 2015.
The banks submitted bids amounting to Tk 4,189.72 crore in the auction for 364-day T-bill, but the government accepted bids worth Tk 800 crore.
The huge amount of bids submitted by the banks against the lower borrowing target of the government indicates that the banks are now facing acute excess liquidity, the BB official said.
On the other hand, the government is squeezing its auction calendar in almost every month as it is facing huge cash surplus in recent months.
The banks had enjoyed remarkable profits by investing their fund in the T-bills and bonds in 2014 and 2015 when they failed to make vibrant their credit flow to the private sector.
The BB official said, ‘Most of the banks will face profit crisis this year due to the lower rates of interest on the T-bills and T-bonds. Besides, the country’s private sector is still facing a dull business situation due to political uncertainties and delicate law and order situation.’
The BB data showed that the rates of interest on the long-term T-bonds also decreased significantly in the last few months as the rate of interest on 2-year T-bond decreased to 5.99 per cent in August this year from 7.20 per cent in August last year, that on 5-year T-bond dropped to 6.54 per cent in August 2016 from 7.60 per cent in August 2015, that on 15-year T-bond fell to 8 per cent in July 2016 from 10.06 per cent in July 2015 and that on 20-year T-bond decreased to 8.48 per cent in July 2016 from 10.36 per cent in July 2015.