Trading govt securities
BB reduces two-way price quoting spread for primary dealers
Expects the measure to bring dynamism in the secondary bond mkt
FE REPORT | Friday, 1 November 2024
The central bank has reduced the spread of two-way price quoting of primary dealer (PD) banks to bring dynamism in the country's secondary bond market, officials said.
Under the new rules, the spread will be fixed on the basis of bid-ask yield instead of price earlier, according to a notification issued by the Bangladesh Bank (BB) on Thursday.
The spread has been reduced to a maximum 0.80 per cent or 80 basis points on all tenor of the government securities (G-Sec) from around 1.20 per cent or 120 basis points earlier, according to the central bank calculation.
"The new rules will help develop the bond market through boosting trading of the G-Sec in the secondary market," a senior official at the BB told the FE.
The central bank has already selected 30 bonds as benchmark securities among 250 government-approved securities.
All the PD banks have already been instructed to submit two-way price quotes to the central bank system.
"Higher yield securities have been included in the latest benchmark which will help attract savers to invest their funds in the G-Sec through secondary market," a senior official at a leading PD bank said, describing the possible impact of the notification.
Echoing the BB official, the private banker also said the new measures of the central bank will help develop the country's secondary bond market.
The BB earlier selected 24 PDs to manage the government-approved securities in the secondary market.
A PD will be eligible for liquidity support from the BB for its operations, collateralised by Treasury bills and Government securities from its own positions, through the repo mechanism or such other arrangements as the BB may prescribe from time to time.
A PD will be entitled to an underwriting commission on the issues of dated government securities underwritten by it, at rates prescribed by the government from time to time.
The PDs will subscribe and underwrite primary issues and make secondary trading deals with two-way price quotations.