Yields on Treasury bills fell below 8% across all maturities in the most recent auction, marking the first simultaneous drop to this level since October 2023. The decline reflects excess liquidity in the banking sector and subdued demand for private-sector credit, which have contributed to a reduction in the government’s short-term borrowing costs to their lowest point in nearly three years.

In the auction held on October 11, the 91-day Treasury bill yield decreased to 7.65%, while the 182-day and 364-day bills yielded 7.75% and 7.89%, respectively. This compares with yields on October 2, 2023, when the 91-day, 182-day, and 364-day bills yielded 7.45%, 7.60%, and 8.25%. Just one week before, on October 4, yields stood at 8.13%, indicating a significant drop of 48 basis points over that short period.

Yields had been trending lower over recent months, following a peak at the September 6 auction when the 91-day, 182-day, and 364-day bills yielded 8.59%, 8.65%, and 8.73%. However, the October 11 auction was the first time since late 2023 that all three maturities fell below the 8% mark simultaneously.

The Treasury bill market serves as a key channel for the government to raise short-term funds. Lower yields on these instruments reduce borrowing costs for the government, while elevated liquidity among banks generally increases demand for government securities. According to central bank data, surplus liquidity in the banking sector has surged by 45% over the past year, surpassing Tk4 lakh crore.

Despite abundant liquidity, private-sector credit growth has remained subdued, falling below 5% for six consecutive months. A majority of excess funds in the banking system have been placed in Treasury bills and government bonds, rather than being extended as loans to businesses or consumers.

This combination of high liquidity and weak credit demand continues to weigh on Treasury bill yields, suggesting ongoing challenges for private-sector lending even as government borrowing costs remain comparatively low.