Headlines
Budget week: FY27 financing in doubt as the curve rallies and taka slips.
Food's Share of Spending Rises as Income Falls
An IMF chart, built on USDA data, plots food spending as a share of GDP against food's share of total consumer spending. Poorer economies sit further up and further right on both scales.
- ▸Advanced economies hold the bottom-left corner. Food takes roughly 5 to 22 percent of consumer spending in that group, on food outlays worth under about 13 percent of GDP.
- ▸Emerging markets spread across the whole middle of the chart. Their markers run from about 11 percent of consumer spending to above 40 percent, and the group overlaps the advanced cluster at one end and the low-income band at the other.
- ▸Low-income developing countries occupy the top-right. Every marker in that group sits above roughly 29 percent of consumer spending, and the highest of them approach 55 percent.
A household that already spends half its money on food has no cheaper category to move into, so a price rise comes out of everything else it buys. The IMF places Bangladesh in the low-income group at the upper right of this chart. Food and beverages carry the largest single weight in the Bangladesh CPI basket, which is the same fact seen from the other side.
Food inflation belongs in the credit process, not only in the macro commentary. A price move reaches disposable income before it reaches any borrower's file, and the thinnest-buffer books — retail, microfinance-linked exposure, small-ticket SME — feel it first. A risk team reading food prices only off the monthly CPI print is working from the slowest signal available.
Policy & Rates (Bangladesh Bank)
Policy held 10% all week; the front-end cut came via auctions, not BB.
FX Reserves
WATCH
- ◆First post-budget T-Bill auction — whether the offshore tilt keeps domestic supply curbed
- ◆June CPI for the budget's VAT/tariff pass-through
- ◆Market USD/BDT past 123.10 against the 122.75 mid
RISK
- ▼Reserve lift is loan-funded — net position softer than gross $34.55bn
- ▼Sticky non-food CPI at 9.09% argues against easing the policy rate
- ▼Market taka at 123.10 widening from the 122.75 mid pressures the anchor
Banking
BB's 30.6% NPL reset reframed the optics; capital, not recognition, still binds.
WATCH
- ◆Bank-level Q1 2026 disclosures due June — the write-off-vs-recovery split
- ◆Whether the 30.6% reset reconciles with the 32.26% Q1 headline
- ◆Whether any stressed lender tables a capital plan
RISK
- ▼CAR 844bp below floor on the Sep read — solvency hole unmoved
- ▼Distressed pile at Tk 10.04tn dwarfs the headline NPL
- ▼Bank-heavy DSEX exposed if the post-budget reopen reprices the sector
Banking's week was a single clarification that moved the optics, not the constraint. BB put end-last-year system NPL at 30.6% — below the 32.26% Q1 print and well under the 35.73% peak — but the headline has always flattered the book: the distressed pile, non-performing plus rescheduled and written-off, runs to Tk 10.04tn, and the fall in recognised NPLs was write-off arithmetic, not borrowers curing. System CAR (Capital Adequacy Ratio) sits 1.56% on the Sep 2025 read — 844bp below the 10% floor — so the sector carries that pile on functionally no capital. It shows in the real economy: private credit growth is stuck at 6.03% even as the curve rallied this week. The book reads any re-rating in a stressed name into the post-budget reopen as sentiment, not solvency. Until a recapitalisation plan lands, capital binds — and 30.6% versus 32.26% is a debate about the label, not the hole.
FX & External
Official mid held 122.75 all week; the market taka slipped to 123.10.
External Flow Balance
Remittance $3.43bn barely covers the $3.04bn May trade gap; the mid held 122.75 all week while the market rate slipped to Tk 123.10.
Cover over the gap thinned to $0.39bn from $1.17bn a month earlier; pre-Eid inflow now past.
Treasury: the market/mid spread is the new stress gauge — watch the June–July remittance dip; reserves up but loan-funded.
WATCH
- ◆Market USD/BDT past 123.10 against the 122.75 mid — the spread is the stress gauge
- ◆June–July seasonal remittance dip after the held $3.43bn May print
- ◆Reserve durability as the budget tilts financing offshore
RISK
- ▼Remittance cover over the gap at $0.39bn — one soft month from negative
- ▼Reserve lift is loan-funded — net softer than gross $34.55bn
- ▼Budget's offshore tilt adds FX-denominated service to a thinning runway
DSE Markets
DSEX carried its 5,519.49 record through budget week into the post-budget reopen.
DSEX Index
DSEX held its 5,519.49 record (set 10 Jun) all week — no fresh print into the post-budget reopen.
The 10 Jun record stands above the prior 5,516.16 high; the tape carried flat through budget week.
Equity desk: hold large-cap quality into the reopen — the taka slip and 30.6% NPL reset are the new inputs; sub-BDT 1,000cr turnover signals stalling.
WATCH
- ◆Post-budget reopen tape — first session to price the FY27 frame and implementation-strain warnings
- ◆Bank-sector reaction to the 30.6% NPL reset and the Tk 10.04tn distressed pile
- ◆Whether turnover holds above BDT 1,000cr on the reopen
RISK
- ▼Record tape — stretched valuations if budget relief stalls
- ▼Bank-heavy index exposed to the distressed-loan pile
- ▼Taka slip to 123.10 pressures import-dependent large-caps
T-Bonds & T-Bills
The whole curve rallied this week — front-end below 10%, 10y to 10.24%.
BD Govt Yield Ladder
Curve rallied this week — 91d 9.85%, 364d 10.03%, 5y 10.35%, 10y down 67bp to 10.24% as the long end joined.
The 5y held 10.78% for ten reads before the budget's rally; the 364d now 10.03% vs 10.50% pre-budget.
ALCO: front-end easing while the external account tightens — fund short, but margins compress on short-funded books; watch domestic supply at the first post-budget auction.
WATCH
- ◆First post-budget auction — whether the offshore tilt durably curbs domestic supply
- ◆June CPI — non-food at 9.09% the risk to the front-end bid
- ◆Whether the 10y holds 10.24% or the long-end term premium rebuilds
RISK
- ▼If the FY27 deficit pushes domestic borrowing back, the curve gives back the rally
- ▼Bull move compresses margins on short-funded ALM (Asset-Liability Management) books
- ▼Sticky non-food CPI re-steepens the curve if June prints hot
Rates were the week's biggest mover, and the move broadened. The post-budget rally that took the front-end through 10% — 91d to 9.85%, 364d to 10.03%, both ~30–47bp below their pre-budget cut-offs — extended this week to the long end: the 10y fell 67bp to 10.24%, the 5y holding its 10.35% off a ten-read flat 10.78%. The mechanism is the budget's financing choice, not a growth call — FY27 leans the deficit offshore, easing domestic crowding and curbing T-Bill supply, so the auction bid firms across the curve. That makes the rally a supply story the desk should not over-trust: if execution slips and the deficit swings borrowing back onshore, the front-end gives back the cut fastest. Fund short into the held cut, but price the give-back risk — and watch the first post-budget auction and June CPI (non-food still 9.09%) as the two triggers that re-steepen.
Macro & Inflation
On the Mar print, 12m-avg held 8.6%, lowest since Mar 2023; credit at 6.03%.
CPI Trend
CPI 12m-avg held 8.6% on the Mar print — food 8.24%, non-food 9.09% — the disinflation read stalled through budget week.
12m-avg at lowest since Mar 2023 (8.4% then), but non-food at 9.09% keeps the average from falling.
MPC: disinflation stalled — yet the auction front-end eased again (91d 9.85%), pricing the stall as a plateau, not a fresh upturn.
WATCH
- ◆June CPI for the budget's VAT/tariff pass-through
- ◆Non-food above 9% (9.09%) as the stickiness tell
- ◆Import cover at 5.86mo as the market taka slips to 123.10
RISK
- ▼Sticky non-food at 9.09% re-steepens the front-end if it persists
- ▼Budget VAT/tariff measures compound the June CPI
- ▼Private credit at 6.03% signals weak demand transmission
Remittance
Remittance held $3.43bn; cover over the $3.04bn gap stays thin into the dip.
Remittance Inflow
WATCH
- ◆June–July seasonal pattern — pre-Eid inflows now past
- ◆Whether the $3.43bn pace holds into the dip as the gap stays wide
- ◆Whether a kerb premium opens as the market rate hits 123.10
RISK
- ▼Post-Eid seasonal dip typical in Jun–Jul — cover already thin at $0.39bn
- ▼Informal-channel share widens if the market/official spread passes 123.10
Commodities
Gold eased to $4,286.50 as the haven bid cooled; LNG quiet at $15.
WATCH
- ◆LNG spot for Jun–Aug monsoon-demand pricing
- ◆Gold as a global risk-sentiment proxy after easing to $4,286.50
RISK
- ▼LNG spike on monsoon power demand lifts Petrobangla off-take costs
- ▼Gold slide signals risk-on rotation — an emerging-market capital-flow read
Fiscal
Budget bets on enforcement for a 10% tax-GDP lift; the chorus doubts capacity.
NBR Tax Revenue
Monthly NBR revenue run-rate held flat all week — YTD collection steady at BDT 3.27tn, still trailing the FY26 target.
The BDT 3.27tn YTD level has held flat across the last twelve reads — the pace set, not accelerating.
Treasury/ALCO: a steady run-rate trims the deficit only marginally — enforcement must deliver to ease the Tk 12.34tn-by-FY29 path.
WATCH
- ◆FY27 domestic-borrowing target against the BDT 1.25tn YTD run
- ◆NBR enforcement and price-benchmark rollout vs the 10% tax-GDP pledge
- ◆First post-budget auction — the deficit-financing mix in practice
RISK
- ▼Execution shortfall pushes borrowing toward Tk 12.34tn by FY29
- ▼Tax-GDP near the world's lowest caps domestic financing
- ▼Offshore tilt swaps crowding for FX service as the market taka slips to 123.10
The week's defining event was the budget, and its defining feature is doubt. BNP's first frame in 20 years — Tk 9.38tn for FY27 — bets on enforcement, not new rates, to lift tax-GDP toward 10% over five years from a base near the world's lowest. By Friday the chorus was full: Fitch flagged execution risk, FICCI warned on the collection goals, RAPID called it promising in direction but tough to implement. None of it lifts collections this year: NBR sits BDT 3.27tn YTD, trailing, with govt bank borrowing at BDT 1.25tn past the FY26 ceiling. FY27 leans the gap offshore — easing domestic crowding and underwriting this week's curve rally — but swaps it for FX-denominated service into a peg the reserves only borrow to hold, the market taka already at Tk 123.10. The desk reads a deficit deferred: the financing, not the spending, is the risk.
Iran War & Oil
Brent held sub-$80 all week at $79.07; US-Iran talks opened a window.
Brent Crude
Brent held below $80 all week at $79.07, WTI $75.41 — ~$32 under May's $111 peak, the sub-$80 regime extending.
The sub-$80 break held all five sessions; May's $111 peak now sits ~$32 above spot.
Treasury: the slide holds the cushion on FY27's pre-war oil math and eases the import bill — watch the $75 line and the deal's durability.
WATCH
- ◆Whether the US-Iran accord holds sub-$80 Brent past the two-month window
- ◆Oil pass-through into June CPI after the budget's tariff measures
- ◆Import-bill relief against the $3.04bn trade gap and the slipping taka
RISK
- ▼A talks collapse re-arms the Tk 42,600cr subsidy tail
- ▼Any bounce lifts the import bill into sticky non-food CPI at 9.09%
- ▼FY27 projections under-provision if oil round-trips
Every morning.
Free.