Banks floating in excess liquidity invested more in treasury bonds in 2015 than in treasury bills (T-bills).

Higher yield rates on long-term securities provided the lure, bankers said.

However, the yield rates of both the securities saw a substantial decline during 2015 over those of the previous year.  

Aggregate investment in the treasury bonds -- officially known as Bangladesh Government Treasury Bonds (BGTBs) -- increased more than 8.0 per cent to Tk 1218.73 billion in the last calendar year from Tk 1124.81 billion a year before, according to the central bank latest statistics.

On the other hand, the banks' investment in the T-bills dropped by 30.45 per cent to Tk 292.28 billion in 2015 from Tk 420.23 billion in the previous year.

"It's a portfolio transformation of the banks," a senior official of the Bangladesh Bank (BB) told the FE Sunday about the switch of sides by the bankers.

The banks may give emphasis on long-term deposits than short-term ones gradually to minimise their fund mismatch, according to the central banker.

Talking to the FE, a senior official of a leading private commercial bank (PCB) said the government issued less T-bills than BGTBs in 2015.

Besides, higher interest rates on the BGTBs than that on T-bills encouraged the banks to invest more in treasury bonds than in the bills, the private banker explained. "We've invested more in the BGTBs to minimise our cost of deposits," the PCB official noted.

The yield -- generally known as interest -- on the BGTBs came down to 5.50-8.70 per cent in December last from 8.48-11.98 per cent a year ago while the interest rates on T-bills dropped to 2.90-4.20 per cent from 7.50-8.40 per cent, according to the banker.

"Such trend may continue until June," he observed.

Currently, three T-bills are being transacted on auction to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.

Furthermore, five government bonds with tenures of two, five, 10, 15 and 20 years respectively are traded on the money market.