Central bank to suspend two monetary tools from July 1
Siddique Islam | Wednesday, 25 June 2008
Bangladesh Bank will suspend issuing two monetary tools at the beginning of fiscal 2008-09 to avoid overlapping in transaction of almost similar debt instruments, officials said.
There will no issuance of 28-day government treasury bill and 91-day Bangladesh Bank bill from July 1 in line with the cash and debt management committee's recommendation.
Currently, a high-powered committee on cash and debt management, headed by the finance secretary, is working on the separation of the cash management from that of the public debt management.
Four government treasury bills (T-bills) are now being transacted through auctions to adjust government borrowing from the banking system.
The T-bills have 28-day, 91-day, 182-day and 364-day maturity periods.
The central bank earlier dropped the two-year tenure T-bill from regular auction on the basis of the cash and debt management committee's recommendation.
On the other hand, two Bangladesh Bank bills -30-day and 91-day - are being used as per the monetary policy of the central bank.
"The decision has been taken in line with international practices," a senior official of the Bangladesh Bank (BB) told the FE, adding that neighbouring countries including Pakistan and Sri Lanka have already suspended issuance of such short-term monetary tool.
The treasury officials of commercial banks, however, said that the latest move may help activate the country's secondary securities market in the near future.
But the initiative will squeeze the scope of sort-term investment opportunity in the government treasure bills, they observed.
"The banks will lose a scope for investment in the popular short-term monetary tool, which is allowed to meet the statutory liquidity ratio (SLR) with the central bank," a senior treasury official of a private commercial bank told the FE.
However, the interest rate on 91-day T-bill may rise in the near future, they observed.
There will no issuance of 28-day government treasury bill and 91-day Bangladesh Bank bill from July 1 in line with the cash and debt management committee's recommendation.
Currently, a high-powered committee on cash and debt management, headed by the finance secretary, is working on the separation of the cash management from that of the public debt management.
Four government treasury bills (T-bills) are now being transacted through auctions to adjust government borrowing from the banking system.
The T-bills have 28-day, 91-day, 182-day and 364-day maturity periods.
The central bank earlier dropped the two-year tenure T-bill from regular auction on the basis of the cash and debt management committee's recommendation.
On the other hand, two Bangladesh Bank bills -30-day and 91-day - are being used as per the monetary policy of the central bank.
"The decision has been taken in line with international practices," a senior official of the Bangladesh Bank (BB) told the FE, adding that neighbouring countries including Pakistan and Sri Lanka have already suspended issuance of such short-term monetary tool.
The treasury officials of commercial banks, however, said that the latest move may help activate the country's secondary securities market in the near future.
But the initiative will squeeze the scope of sort-term investment opportunity in the government treasure bills, they observed.
"The banks will lose a scope for investment in the popular short-term monetary tool, which is allowed to meet the statutory liquidity ratio (SLR) with the central bank," a senior treasury official of a private commercial bank told the FE.
However, the interest rate on 91-day T-bill may rise in the near future, they observed.