BB starts buying govt securities

The central bank started purchasing government securities from banks and financial institutions, working as primary dealers (PDs), Tuesday to inject fresh funds into the market. "We've accepted two offers worth nearly Tk 630 million from two PDs on the first day of purchasing government securities," a senior official of Bangladesh Bank (BB) told the FE. He also said such purchasing may continue in the near future using its secondary trading window to inject more fresh funds into the country's money market. "All PDs are allowed to offer for sales their government securities, particularly short term treasury bills (T-bills), which will mature between May and June period," another BB official said. Currently, three T-bills are being transacted through auctions to adjust the government borrowing from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods. The central bank of Bangladesh has taken the latest move aiming to ease pressure on the money market through injecting funds with buying back the T-bills from the PDs. The central bank official also said the BB has started purchasing these securities from the PDs after nearly three years. Market players, however, expressed their dissatisfaction at the BB's latest move, saying that it will not able to ease the existing liquidity pressure on the money market. "All PDs will not able to sell their securities due mainly to imposition of restriction on mature period of the T-bills, by the central bank," a senior member of the Primary Dealers Bangladesh Limited (PDBL) told the FE. He also said the central bank should review its existing policy relating to purchase of the government securities to ensure selling of the securities by all PDs. "The liquidity pressure on the market will ease if the central bank goes for buying the Bangladesh Government Treasury Bonds (BGTBs) along with T-bills from the PDs," the PDBL member said. Four government bonds 5-year, 10-year, 15-year and 20-year are being traded in the market. "We're now facing additional pressure on our liquidity position after the government has increased borrowing from the banking system to meet its budget deficit in the last quarter of the current fiscal," he added. The government is set to borrow Tk 63.25 billion from the PDs through issuing treasury bills (T-bills) and bonds during April-June period of the fiscal year 2010-11 (FY11). The government's net borrowing from all commercial banks and financial institutions through issuing T-bills and bonds stood at Tk 93.55 billion during the July-March period of FY 11, according to the central bank statistics. During the period, the government has borrowed from the banking system up to 60 per cent of its annual borrowing target, which was fixed at Tk 156.80 billion to finance the budget deficit for the FY11.