Bangladesh is one of the fastest growing economies of the world. According to a Bloomberg report, Bangladesh is seen on a track to be a trillion dollar economy by 2040. In contrast, the number of MAC (middle and affluent class) of people is growing and they are sometimes struggling to find the best way to invest their surplus fund. Having a very limited option for investment, they mostly deposit their funds with banks and non-bank financial institutions (NBFIs) in the form of term-deposit. Some of them invest in the capital market and cannot earn good return for various reasons. As the real estate is also not a liquid asset class, it also does not serve their purpose accordingly. Other investment options such as gold are also not that convenient in Bangladesh because of its discounted value at the time of sale. In order to cater to diversification and maximising the return, Bangladesh Bank and Bangladesh Securities & Exchange Commission (BSEC) have introduced Govt. Treasury Bond, a risk-free instrument, for the investors. Unlike Sanchayapatra's maximum investment threshold, there is no investment ceiling for this asset class. Anyone can invest starting from BDT 100 thousand and so on. Investing in listed T-Bond is allowable for tax rebate up to 15 per cent in Bangladesh.
Currently, the Government Securities (G-Sec) market of Bangladesh consists of both listed and non-listed securities. Tradable securities include T-Bills (Treasury Bills) and BGTBs (Bangladesh Government Treasury Bonds). T-Bills are of 91, 182 and 364-day maturities and Treasury Bonds are of 2, 5, 10, 15 and 20-year maturities. Treasury Bonds are coupon-bearing debt instruments where coupons are paid semiannually and the principal is repaid on maturity. At present, any investor can invest in the T-bills and bonds through discretionary fund managers. Interestingly, unless full early liquidation of a savings scheme is required, T-bonds can be sold partially to meet the immediate need of liquidity for an investor. If the fund is invested through a fund manager, there is no excise duty and 5.0 per cent AIT is applicable instead of 10 per cent charged by banks or NBFI on savings schemes. However, there is an ample chance of capital gain or loss, if the bond yield fluctuates and it is settled before maturity. In case the rate increases, the investor may face capital loss for settlement earlier prior to maturity and vice versa. No capital gain and loss will be incurred, if the instrument is held till maturity. One of the most significant advantages of Treasury bonds is their unparalleled safety. Issued and backed by the government, these bonds are considered virtually risk-free. The full faith and credit of the government stand behind these securities, making them a stable and secure investment option. Whether you're a risk-averse investor or looking for a safe haven in times of economic uncertainty, Treasury bonds offer peace of mind. It provides fixed interest payments at regular intervals. Investors can rely on this predictable income stream, making them an attractive option for those seeking stable returns. This predictability is especially valuable for retirees who depend on a steady source of income to cover living expenses. In addition, it acts as a counterbalance to riskier assets, such as stocks. When the stock market experiences volatility, Treasury bonds often remain stable, helping reduce the overall risk in a portfolio.
Maybe, this is high time for the investors of Bangladesh to consider this asset class and take investment advice from their financial advisors as necessary.
The writer is Head of Portfolio Management, IDLC Investments Limited.
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