Treasury Weekly Report

W- 26/2020

On the radar

Impact of COVID-19 on our Economy

 GDP growth in the last fiscal year recorded 5.24% against the target 8.2% but per capita income increased to
$ 2,064, last year it was $ 1,909.
 Export performance rebound to $3.91 bn against target of $ 3.45 bn in July. The proposed export target set in
FY 2020-21 of $ 41.0 bn and FY 2019-20 it was of $ 33.67 bn.
 NBR revenue collection far behind the target first month in this fiscal year. The total collection is Tk. 123.34
bn against the target Tk. 193.78 bn which is almost 22% negative growth.
Key Market Developments
 Japan will give $ 3.2 billion as loan for development project of Govt. and the concessional interest rate is only
0.65%. This loan project will be operated through JICA.
 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 the net borrowing from Gsec stood of Tk. 125.21 billion and in August it
will be of Tk. 42.01 billion.
 Export growth in July over June is 44% whereas Import growth in June over May is 25.85%, so our economic
recovery is going faster scale and trade deficit is only $ 1.70 billion which can be easily manage by our
remittance inflow.
 Retail and SME fail to achieve the loan attention of Banks due to of its high operational cost and credit risk
problem.
 Central Bank has injected cash currency of Tk. 392.07 billion in last five months, at the end of May it stood at
Tk. 2.11 trillion and in Feb it was Tk. 1.71 trillion.
 BB forex reserve stood at USD 37.85 billion as on August 13, and we are expecting to cross $ 38.0 billion in the
next week. The reserve increase significantly during this seven month of USD 5.30 billion, at end of December
2019 it was USD 32.68 billion and our neighboring county India also hits a record of USD 522 billion.
 Central Bank did not purchase any dollar from market in this month yet but in this week dollar liquidity will
be good enough so the banks may proceed to central bank to sale the excess dollar.
 Inflation in June 5.65 that is slightly increase from the previous month May 5.61.
 Money circulation outside of Banks increased abruptly during pandemic by 21% in June compare to January
and Deposit growth is only 3.79% in June compare with January.
Components Currency Outside banks (billion) Total Deposit with DMBs (billion)
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 week of TK. 41.00 billion and T-bond coupon interest 3.65 billion against this
auction amount is 50.00 billion so market net negative gap will be of Tk. 5.35 billion.
- Money Market transaction was Tk. 86.418 billion as on August 12 and weighted average rate was 4.71%, but
last week it was Tk. 77.61 billion, so transaction volume slightly improved after Eid and other deposits are
injected into the banking channel.
 - Remittance inflow was $ 290.59 million till August 6, and this month remittance inflow may fall. Last month
the net inflow was $ 2,599 million and it was a record in the country.
- Outstanding balance of BB LSF through Repo and ALs decrease after Eid and the total outstanding of Tk. 30.00
billion (approx.) as on August 12, 2020.
- BB keep the interbank dollar rate at range of 84.80 – .95 and the last market moves around 84.80 - .85.

Comments
 On the liquidity side, Govt. may enhance/revise its borrowing pattern from banking channel due to poor
revenue collection of NBR. So, big volume auction calendar may come in the coming days. Govt. also keep
the market liquidity through refinancing the private and SME sector.
 On the rate side, cut down of repo rate will guide the market one step down in the rate side and on top of,
too much liquidity in Banks and uncertain to recover from this pandemic force Banks to reinvest in Govt.
securities and for that reasons rates going down and it will continue.
 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 - .85 last day of previous week as
against 85.05 in the first session of the week.
 BB forex reserve will increase more as the remittance inflow is good and low import payment. But the
reserve needs to be utilize, once the payment get its normal outflow.
 Last week Treasury bond auction of 5 years fall down of 45 basis point and this week of 10 years will also fall
around 50 basis point or more.
Global market Key developments
 Asian stock markets ended largely in the green today. Shanghai Composite (1.19%), Nikkei (0.17%) and
Australia ASX (0.58%) ended in the green today, while Hang Seng (-0.19%) and Kospi (-1.23%) ended in the red
today.
 Dollar index is trading flat at 93.21 as a jump in U.S. bond yields and a drag on sentiment from lackluster
Chinese economic data put the brakes on a sell-down of the dollar. The EUR/USD pair is trading flat at 1.1815
level amid a steady dollar as US retail sales increase by 1.2% in July from 1.9% expected. Eurozone economic
output shrank in the second quarter by 12.1% QoQ in 2Q2020, matching the expectations. The GBP/USD pair
is trading 0.34% higher at 1.3107 level despite the British government's imposing a quarantine on many tourists
to curb any further rise in coronavirus cases. The USD/JPY pair is trading 0.26% lower at 106.64 level supported
by a recovery in tertiary industry Index to 7.9% in June from -2.9% in the previous month and global equity sell-
off.
 US treasuries are trading flat. The US 10 Y benchmark is trading at 0.71% that is relatively unchanged from
the previous close.
Commodity market developments
 Gold is trading 0.79% lower today receding demand for safe-haven assets after optimism over the potential
vaccine. The emergence of selling around the US dollar, amid the impasse over the next round of the US fiscal
stimulus measures, extended some support to the yellow metal. Gold is trading at USD 1954.00/oz.
 Oil is trading flat today as uncertainty over global oil demand case by a downward revision in IEA and OPEC
forecast. The below-forecast Chinese retails sales and industrial production data raise a concern about
China’s economic recovery. Hence putting pressure on oil prices. Brent and WTI are trading at USD 44.95/bbl
and USD 42.27/bbl 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.