FE Report
The Bangladesh Bank (BB) is going to modify the auction system of the government bonds from the beginning of the next fiscal aiming to activate the country's secondary bond market, official sources said.
Under the proposed system, the auction of government bonds will be held under the yield based multiple prices system instead of the existing discount method to ease price calculation of the bonds.
The central bank has started consultations with the stakeholders including banks, non-banking financial institutions and insurance companies before issuing directive in this connection, the sources added.
The first consultation meeting was held at the central bank Monday with the Executive Director of BB Yasin Ali in the chair to discuss about bringing changes in the existing system of the government bond auction.
"We will issue a circular in this connection later this month after the end of the consultations," a BB senior official told the FE Monday, adding that the last consultation meeting is scheduled to be held Wednesday in the central bank.
He also said the move will be able to bring about dynamism in the country's secondary bond market.
However, the market players see the move positively saying that the amendment might be able to attract long-term fixed income investors like provident fund and life insurance companies.
"We are hopeful about the rise in the demand for government bonds in the secondary market following the initiative," a senior official of a private commercial bank told the FE.
Earlier, the government introduced two bonds of five and ten-year terms to boost the secondary bond market and promote savings through attracting the fixed income groups to invest in these instruments.