Rising vs Falling Treasury Bill Yields: What They Mean for Your Money
Treasury bill yields rarely make front-page news, but they quietly shape almost every money decision you make. They influence what your bank pays on a fixed deposit, what your bonds are worth, how much companies pay to borrow and how investors value shares on the Dhaka Stock Exchange (DSE).
This guide explains what these yields are, why they move, and what rising or falling yields tend to mean for different kinds of investors in Bangladesh.
What are treasury bills and bonds?
When the Government of Bangladesh needs to borrow, it sells debt securities through Bangladesh Bank. Short-term borrowing uses treasury bills (T-bills) with maturities of 14, 91, 182 and 364 days. Longer-term borrowing uses Bangladesh Government Treasury Bonds (BGTBs), with tenors from 2 to 20 years, which pay interest every six months.
The yield is the annual return an investor earns at the price paid. Because the government is the borrower, these securities carry very little default risk, which is why their yield is often called the “risk-free” rate. That rate becomes the benchmark against which every other investment is judged.
How yields are set at auction
Bangladesh Bank holds T-bill auctions every week and bond auctions on a monthly schedule. Banks, financial institutions and other eligible investors submit bids stating how much they want and at what yield. The authorities accept bids starting from the lowest yield until the borrowing target is met. The highest accepted yield becomes the cut-off yield, the figure you see reported in the news.
So yields are not fixed by decree. They reflect how much money is chasing government paper compared with how much the government needs to borrow.
Why yields rise or fall
- Policy rate: When Bangladesh Bank raises its policy (repo) rate, money becomes more expensive across the system and yields usually follow upward. Cuts tend to pull yields down.
- Inflation: Investors want a return that keeps pace with rising prices. High or rising inflation pushes required yields up.
- Government borrowing needs: A larger budget deficit, or heavier borrowing from banks, means more bills on offer, which typically lifts yields.
- Bank liquidity: When banks hold surplus cash and private loan demand is weak, they compete to buy government securities, pushing yields down.
- Remittances and foreign exchange: Strong remittance inflows, and Bangladesh Bank buying dollars from banks, add taka liquidity to the system, which tends to ease yields.
When yields rise: who feels it and how
(a) Existing bondholders: prices fall
Bond prices and yields move in opposite directions. Suppose you hold a 5-year bond with a face value of Tk 1,00,000 paying a 10% coupon (Tk 5,000 every six months). If new 5-year bonds start yielding 12%, nobody will pay full price for your 10% bond. Its market value would drop to roughly Tk 92,600, a fall of about 7%.
If you hold the bond to maturity, you still receive every coupon and your full Tk 1,00,000 back. The loss only becomes real if you sell early. Longer bonds are more sensitive to yield changes than shorter ones.
(b) New savers: better returns
For anyone with fresh cash, rising yields are good news. New T-bills, bonds and, usually after a lag, bank fixed deposits (FDRs) offer higher returns. Short-term instruments let savers reinvest quickly at the new, higher rates.
(c) The stock market: tougher competition
Higher yields raise the opportunity cost of owning shares. If a near risk-free government security pays well, a share with a modest dividend yield and uncertain growth looks less attractive. Some investors shift money from equities into fixed income.
Higher yields also raise the discount rate investors apply to future earnings, so the same profits justify a lower price. This is valuation compression: price-to-earnings ratios tend to shrink. Rate-sensitive sectors, such as heavily indebted manufacturers, real estate-linked businesses and non-bank financial institutions that rely on borrowed funds, often feel this most.
(d) Companies: higher borrowing costs
Bank lending rates generally rise alongside government yields. Companies with large loans pay more interest, which eats into profits and can reduce dividends. Expansion plans may be delayed. Companies with little debt and strong cash balances are less exposed and may even earn more on their deposits.
(e) Margin borrowers: a heavier load
Investors who buy shares with borrowed money face higher interest on their margin loans just as share prices may be under pressure. This combination can be painful, and it is a reason to be cautious with leverage when rates are climbing.
(f) Banks: mixed effects
Banks earn more on new government securities and loans, but they must also pay more for deposits. Banks holding large portfolios of older, lower-yielding bonds may see the market value of those holdings fall. Higher rates can also increase loan defaults among stretched borrowers.
When yields fall: the picture reverses
- Existing bondholders gain. Using the same example, if 5-year yields fell to 8%, the 10% bond would be worth roughly Tk 1,08,100, so a holder could sell at a profit.
- New savers earn less. Maturing T-bills and FDRs roll over at lower rates, and real returns can turn negative if inflation stays high.
- The stock market faces less competition from fixed income. Dividend yields look relatively more attractive, and lower discount rates can support higher valuations.
- Companies borrow more cheaply over time, which can lift profits, particularly for indebted firms.
- Margin borrowers pay less interest on their loans.
- Banks see bond portfolios gain in value, but their margins can narrow and they must find productive lending rather than relying on government paper.
Summary table
| Group | Rising yields | Falling yields |
|---|---|---|
| Existing bondholders | Market price falls | Market price rises |
| New savers (T-bills, FDRs) | Higher returns on new money | Lower returns on new money |
| Shares | More competition from fixed income; valuations tend to compress | Less competition; valuations tend to find support |
| Companies | Higher interest costs, pressure on profits | Lower interest costs, relief on profits |
| Banks | Higher income on new assets, but costlier deposits and bond losses | Bond gains, but thinner margins and pressure to lend |
Remember that these are tendencies, not rules. Company earnings, politics, foreign exchange and investor sentiment can easily outweigh the effect of interest rates in any given period.
What this means in Bangladesh in 2026
After a long period of rising rates, yields in Bangladesh have been falling through 2026. T-bill yields climbed above 9% in October 2023 and peaked around 11.75–12% in October 2024. In early 2026 they were still around 10%: at the 22 February auction, the 91-day bill cleared at 10.02% and the 364-day at 10.07%.
Longer bonds followed a similar path. The 10-year bond cut-off yield was 10.37% in February 2026, and the 5-year bond fell to 10.22% in March 2026. By the 1 October 2026 auctions, cut-off yields were about 8.87% for 2-year, 8.65% for 5-year, 8.54% for 10-year and 9.34% for 15- and 20-year bonds.
Bangladesh Bank cut its policy rate from 10% to 9.50% in early August 2026, its first cut in nearly two years, and kept it at 9.50% in its 30 September monetary policy statement, warning that premature easing could reignite inflation. Banks quickly trimmed deposit rates, with returns expected to fall to around 8.50–9%.
The fall has since accelerated. At the 11 October 2026 auction, cut-off yields dropped below 8% across all three main tenors for the first time since October 2023: 7.65% for 91-day, 7.75% for 182-day and 7.89% for 364-day bills. Reports point to surplus bank liquidity and private-sector credit growth stuck below 5% for six months, with banks parking idle funds in government securities.
Meanwhile, inflation was 8.34% in September 2026. That means a 364-day T-bill now yields less than inflation, so the real (inflation-adjusted) return on short-term government paper is slightly negative. For savers, the era of easy double-digit “safe” returns has, for now, faded.
In theory, this environment reduces the competition that equities face from fixed income and eases borrowing costs for companies. Whether that translates into share price gains depends on many other factors, including earnings, governance and confidence. We make no prediction about where yields or the market will go next.
How investors can position themselves
- Match bond maturity to your needs. If you will need the money in two years, a 2-year bond held to maturity removes most price risk. Longer bonds lock in today’s yield but swing more in price if you sell early.
- Think in real terms. Compare any return with inflation, not just with last year’s rate.
- Take a long view on equities. Over full rate cycles, quality shares have historically had the potential to outpace fixed income, but there are no guarantees and losses are possible.
- Be careful with margin. Lower rates make borrowing cheaper, but leverage magnifies losses as well as gains.
- Diversify. A mix of government securities, deposits and a spread of listed shares can smooth out the effect of rate changes on your overall portfolio.
You can buy Bangladesh Government Treasury Bonds through your BO account. See how it works on the Mika Securities Treasury Bond page. New to investing? Start with our guide to the basics of the Bangladesh stock market.
Mika Securities Ltd has been a DSE broker since 2005 (TREC No. 215), with 26 offices across the country. Ready to start? Open your BO account online and invest through the Amar Biniyog app.
This article is for general education only and is not investment advice. Investment carries risk; past performance does not guarantee future returns. Figures cited are from public sources as of October 2026.