Money market remains liquid

Money market remained liquid throughout the week, with slight pressure on the last day of the week as inter-bank participants took part in the bidding in BB auction. The market became liquid when the central bank accepted only 50 per cent of bid volume. The Bangladesh Bank is maintaining money supply scenario in the market through treasury securities, although this stance is a short term solution and not conducive in the long run. As the government has surplus funds at its dis-posal it is borrowing much less than expected by the market through the auction of treasury securities. Call money rate remains within the range of 3.00 per cent and 4.00 per cent with little indication of upwards or downwards movement in the course of the next 3 months.

Interest rate scenario in the market has spurred credit growth as lending rates have fallen significantly. Accordingly banks are adjusting their deposit rates dissuading the retail base from keeping their deposits in banks. Cus-tomers are increasingly looking towards other avenues of investment such as National Savings Certificate. Private sector credit growth has seen the highest ever growth rate of 14.91% due to the conducive borrowing rates. BB bill maturity of BDT 2850 crore could create future liquidity in the market in the short term. However, subsequent issuance of securities by the central bank is expected, keeping the market rate stable. Market will remain within 3.00%-4.00% over the course of the next 3-4 months given the central bank manages excess liquidity through issuance of securities. Rate moved upto Tk 78.70 as market started short covering as central bank continued their purchase of USD. Interbank outright volume has increased more than previous month. With stable market liquidity scenario, Bangladesh Bank reserve remained above USD 27 billion as they bought USD 108 mio already this year. The inward flow of remittances has been on a downturn with the January receipts dropping more than 12.0%, from the previous month. According to a BRAC Bank review, USDBDT price stabilized around 78.75/80 level. Further depreciation in INR and CNY might influence central bank to depre-ciate BDT against USD further towards 79.00, the weekly review of BRAC Bank said.