Treasury Weekly Report

W- 30/2020

On the radar

Impact of COVID-19 on our Economy

 BB urges to Banks to meet the deadline of loan disbursement for CMSMEs by Oct 31, Banks so far disabused
of Tk. 20.0 billon against the target of Tk. 200.0 billion.
 Trade deficit narrowed by 91.89% or $ 975.0 million as export soared and import dropped amid the country’s
pandemic situation.
 Inflation raised by 15 basis point in Aug, previously the CPI was 5.53 in July. Inflation led by the increase of
food price for flood up 3 basis point whereas non-food items declined by 23 basis point.
 Banks have disbursed of Tk. 185 billion as working capital loan to large and service sector as part of stimulus
package. BB instructed to disburse remaining portion within October.

Key Market Developments

 BB forex reserve hit the record of $ 39.92 billion and it will surpass $ 40.00 billion in this month if this trend
continue.
 Govt. set the borrowing target from banking sector of BDT 849.83 billion in this fiscal year and through Saving
Certificate of BDT 250.0 billion, in July – Sep net Govt. borrowing from Banking sector will stood at of Tk. 200.05
billion or 23.54% of the target.
 Retail and SME fail to achieve the loan traction of Banks due to of its high operational cost and credit risk
problem and Banks are investing its surplus liquidity in Govt. securities.
 Central Bank increased money supply through stimulus package of Tk. 185.0 billion till August.
 Export increased by 0.59% in July 20, stood at $ 3,901.92 mn whereas import decreased by 19.42% in July 20,
stood at $ 4228.00 mn compare to its same period of previous fiscal year.
 Central Bank purchased dollar from market of $ 392.0 million in August 20, and $ 108.0 million in last two
days of Sep 20, as the market has no major import payment pressure in the last week.
 Money circulation outside of Banks increased by 9.67% in July compare to June due to Eid and Deposit
growth is only 1.04% in July compare to its last month.

Components Currency Outside banks (billion) Total Deposit with DMBs(billion)

July, 2020 2,109.84 11,933.93
June, 2020 1,923.84 11,810.25
May, 2020 1,937.51 11,570.96
April, 2020 1,776.22 11,475.46
January, 2020 1,589.18 11,378.86
Domestic Market developments and Liquidity Condition
- G-sec total maturity in this month of TK. 99.28 billion and T-bond coupon interest 12.55 billion and BB
maturity of Tk. 22.33 billion against this auction amount is Tk. 182.00 billion so market net negative gap will
be of Tk. 47.83 billion.
- Money Market transaction was Tk. 72.85 billion as on Sep 02 and weighted average rate was 3.55%, whereas
as on Aug 31 transaction volume was Tk. 92.98 with weighted average rate was 4.49%. The transaction
volume decreased because interbank repo transaction volume increase and the rate is following downtrend.
- Wage earner’s remittance inflow was $ 1.96 billion in Aug 20, remittance inflow is still counting a good volume
as Govt. correctly addressed the problem and came up with effective measure by allowing cash incentive.
 - Though the money market was severely liquid but four Banks applied for Repo to BB of Tk. 9.36 billion of 7
days tenor.
- BB keep the interbank dollar rate at 84.80 and interbank dollar market moves at the BB fixed rate. Banks are
frequently approached to central bank for selling dollar and last week sold $ 108.00 million.

Comments
 On the liquidity side, this week as well as next week the money market will be liquid and third week will be
little bit tight as the market liquidity may be wiped out by the auction amount. But still there will be chances
of fresh liquidity by purchasing of dollar and refinance disbursement of BB.
 On the rate side, abandon liquidity will bring down the rate of T-bills and T-bonds this month. As Banks are
holding enough liquidity and feeling uncomfortable to allow fresh loan, force them to hold excess amount
Govt. securities and push the yield one step down.
 By purchasing dollar from the market, BB injected TK. 145.34 billion into the market in the FY 20-21.
 Govt. trying to borrow the main source of its fund through banking channel as its NSC sales falls after its
digitalization sales process.
 BDT ended stronger against the Dollar last week, low import payment, pick up of export volume and good
inflow of remittance are the cause behind it. The USD/BDT closed at 84.80 last day of previous week as
against 84.85 in the first session of the week.
 BB forex reserve will surpass $ 40.00 billion as BB purchasing dollar from the market to support the level @
84.80 and import volume will take time to pick up due to the pandemic fear.
 Cut off yield of T-bills of 91 days and 182 days will fall both at least 50 basis point and 2 years bond yield also
fall 60 basis point
Global market Key developments
 Asian stock markets ended lower in today’s session. Kospi (-1.15%), Australia ASX (-3.06%), Shanghai
Composite (-0.87%), Hang Seng (-1.25%) and Nikkei (-1.11%) ended in red today.
 Dollar index is trading flat at 92.83 but is set for the biggest weekly rise in over a two-month period as an
overnight drop in US technology stock fuelled risk aversion in global markets and supported the dollar.
The EUR/USD pair is trading flat at 1.1849 level amid a dollar rebound and mixed economic data. German
Factory orders increased by 2.8% MoM much lower than the 28.8% MoM increase in June, worse than 5%
expected. GBP/USD is trading 0.11% lower at 1.3265 level as amid dollar strength and uncertainty surrounding
Brexit negotiations as senior officials see only a 30-40% chance that there will be Brexit trade agreement. Also,
a dovish statement by BoE’s Saunders that BoE will probably add further emergency support in the coming
months has started to weigh on the GBP. USD/JPY is trading flat at 106.19 level supported by a risk-off
environment on the back of global equity sell-off that resulted in a pick-up in safe haven flows.
 US treasuries are trading flat. The US 10 Y benchmark is trading at 0.64% that is relatively unchanged from the
previous close.
Commodity market developments
 Gold is trading 0.47% higher today supported by a sharp fall in global equity markets post the US technology
stock fall that was witnessed in overnight session. However, the rise in the US equity futures, along with a
pickup in the US treasury bond yields capped the upside for the non-yielding yellow metal. Gold is trading at
USD 1946.65/oz.
 Oil is trading 0.32% higher today recovering from a sell-off amid the slower pace of recovery in oil demand in
the US and globally as middle distillates inventories at Asia’s Singapore oil hub have soared above a nine-year
high underscores the weakening demand for crude oil. The Baker Huges US rigs count data will provide fresh
assessment related to the oil market dynamics today. Brent and WTI are trading at USD 44.22/barrel and USD
41.59/barrel respectively.
Disclaimer
This report is prepared to be used for information purposes only. It is not, under any circumstances, to be used for market making and/or strategic decisions. It’s intended to
share market information and it will not be responsible to bear any financial or business loss taking any decision based on it.