BB opens new window for trading govt bonds only
Sunday, 18 November 2007
Siddique Islam
The Bangladesh Bank (BB) has opened a new window for trading only government bonds aiming to bring dynamism in the country's secondary bond market, official sources said.
The central bank used the outlet for the first time Thursday to trade government bonds worth Tk 20 million with two private commercial banks - National Credit and Commerce Bank Limited (NCCBL) and Jamuna Bank Limited.
"We have introduced the window with an objective to activate the country's secondary bond market," a BB senior official told the FE, adding that all commercial banks and non-banking financial institutions (NBFIs) will be allowed to take part such trading.
Besides, the new facility will also help all banks, particularly the primary dealers (PDs), to engage in trading of such bonds among themselves, the BB official observed.
Bankers, however, welcomed the BB's new mechanism, saying that the latest move will help bring dynamism in the secondary bond market.
"The new measure will help the banks and NBFIs to ensure availability of the government securities as well as cash liquidity," Head of the Treasury of the NCCBL Ashim Kumar Saha told the FE while explaining the impact on the market.
Earlier, the central bank selected nine PDs - eight banks and a NBFI - to handle government-approved securities in the secondary bond market and issued guidelines for them.
The central bank has already amended the guidelines for PDs allowing commission and liquidity support to activate the secondary bond market.
Under the amended guidelines, the bank and non-bank PDs will underwrite a minimum of 12 per cent and 4.0 per cent respectively of the auction amounts for the fiscal year 2007- 08 until further notice.
"The PDs will be paid the underwritten commission at a rate that may be determined by the government from time to time," the central bank said in its amended guidelines, issued recently.
The PDs will subscribe to, and underwrite, primary issues and make secondary trading deals with two-way price quotations.
A PD will not short-sell any particular issue and will not hold a short position in secondary dealings. The PDs will not act as inter-bank or inter-dealer brokers as specified in the guidelines.
Currently, four government bonds - 5-year, 10-year, 15-year and 20-year -are being traded in the markets.
The Bangladesh Bank (BB) has opened a new window for trading only government bonds aiming to bring dynamism in the country's secondary bond market, official sources said.
The central bank used the outlet for the first time Thursday to trade government bonds worth Tk 20 million with two private commercial banks - National Credit and Commerce Bank Limited (NCCBL) and Jamuna Bank Limited.
"We have introduced the window with an objective to activate the country's secondary bond market," a BB senior official told the FE, adding that all commercial banks and non-banking financial institutions (NBFIs) will be allowed to take part such trading.
Besides, the new facility will also help all banks, particularly the primary dealers (PDs), to engage in trading of such bonds among themselves, the BB official observed.
Bankers, however, welcomed the BB's new mechanism, saying that the latest move will help bring dynamism in the secondary bond market.
"The new measure will help the banks and NBFIs to ensure availability of the government securities as well as cash liquidity," Head of the Treasury of the NCCBL Ashim Kumar Saha told the FE while explaining the impact on the market.
Earlier, the central bank selected nine PDs - eight banks and a NBFI - to handle government-approved securities in the secondary bond market and issued guidelines for them.
The central bank has already amended the guidelines for PDs allowing commission and liquidity support to activate the secondary bond market.
Under the amended guidelines, the bank and non-bank PDs will underwrite a minimum of 12 per cent and 4.0 per cent respectively of the auction amounts for the fiscal year 2007- 08 until further notice.
"The PDs will be paid the underwritten commission at a rate that may be determined by the government from time to time," the central bank said in its amended guidelines, issued recently.
The PDs will subscribe to, and underwrite, primary issues and make secondary trading deals with two-way price quotations.
A PD will not short-sell any particular issue and will not hold a short position in secondary dealings. The PDs will not act as inter-bank or inter-dealer brokers as specified in the guidelines.
Currently, four government bonds - 5-year, 10-year, 15-year and 20-year -are being traded in the markets.