Fragmentation of instruments ought to be averted
Thursday, 14 January 2010
FE Report
The development of the country's securities market requires aligning of the intetest rates on national savings certificates with that of the government approved securities to avoid fragmentation of instruments.
The regulators, market participants and the World Bank (WB) have identified the issue of bringing dynamism to the country's both primary and secondary securities markets.
"….securities market development needs to avoid fragmentation of instruments by aligning the national savings schemes rates along with treasury bills ((T-bills) and treasury bonds (T-bonds)," a WB information note said Tuesday.
Higher difference of interest rates between national savings instruments and the government approved securities is the main obstacle to development of the country's securities markets, treasury officials said.
"The interest rates on national savings certificates are now higher ranging 3.0 per cent to 4.0 per cent compared to the government securities," a senior treasury official told the FE.
The note said it has been agreed that automation of the auction and registry systems will improve efficiency of the primary market. "It is also important to review and improve the current primary dealers systems," it added.
The WB team, along with Bangladesh authorities concerned, has revisited the status of the government securities market in the country and identified the critical areas for its further development.
The team noted that transparency in the primary market of the government securities has improved in recent years with introduction of auction calendar and publishing auction results.
However, the auction system has remained manual. Besides, the demand for government securities heavily relies on captive source.
"Therefore, there is a scope for the market development of both primary and secondary markets of government securities," the note added.
An efficient and liquid domestic debt market is important for public debt management, bank liquidity management and monetary policy implementation.
Currently, three T-bills are being transacted through auctions to adjust to the government borrowing from the banking system.
The development of the country's securities market requires aligning of the intetest rates on national savings certificates with that of the government approved securities to avoid fragmentation of instruments.
The regulators, market participants and the World Bank (WB) have identified the issue of bringing dynamism to the country's both primary and secondary securities markets.
"….securities market development needs to avoid fragmentation of instruments by aligning the national savings schemes rates along with treasury bills ((T-bills) and treasury bonds (T-bonds)," a WB information note said Tuesday.
Higher difference of interest rates between national savings instruments and the government approved securities is the main obstacle to development of the country's securities markets, treasury officials said.
"The interest rates on national savings certificates are now higher ranging 3.0 per cent to 4.0 per cent compared to the government securities," a senior treasury official told the FE.
The note said it has been agreed that automation of the auction and registry systems will improve efficiency of the primary market. "It is also important to review and improve the current primary dealers systems," it added.
The WB team, along with Bangladesh authorities concerned, has revisited the status of the government securities market in the country and identified the critical areas for its further development.
The team noted that transparency in the primary market of the government securities has improved in recent years with introduction of auction calendar and publishing auction results.
However, the auction system has remained manual. Besides, the demand for government securities heavily relies on captive source.
"Therefore, there is a scope for the market development of both primary and secondary markets of government securities," the note added.
An efficient and liquid domestic debt market is important for public debt management, bank liquidity management and monetary policy implementation.
Currently, three T-bills are being transacted through auctions to adjust to the government borrowing from the banking system.