Secondary market of govt securities becoming active
Thursday, 2 August 2007
Siddique Islam
The secondary market of government-approved securities is becoming active gradually to create a new window for investment by the financial institutions.
The commercial banks and non-banking financial institutions (NBFIs) now prefer investing in the government-approved securities like treasury bills (T-bills) and bonds mainly because of higher yield.
In the inter-bank market, the call rate maintained a steady trend ranging between 6.50 per cent and 6.70 per cent in the past couple of months indicating excess liquidity in the banking system.
On the other hand, the interest rate on 28-day T-bill, the lowest tenure government approved security, is now offered at 7.32 per cent.
Meanwhile, the central bank slashed the interest rate on 30-day Bangladesh Bank bill by 0.04 percentage points to 7.36 per cent from 7.40 per cent earlier, sources in the market said.
The primary dealers (PDs) earlier urged the central bank to re-fix the interest rates on the Bangladesh Bank bills to encourage the non-PD banks and NBFIs for participation in the auctions for the government approved securities.
Sources, however, said some local and foreign commercial banks are now trading the securities, particularly the T-bills to utilise their excess liquidity.
But some insurance companies are being investing their funds in the government bonds of particularly 5-year and 10-year tenures as long-term investment.
"We feel encouraged to invest in the secondary market of government-approved securities now. It will help develop the country's domestic financial market," a senior treasury official of a foreign commercial bank told the FE Wednesday.
He also said some banks are showing interest to trade on the securities in the market.
Besides, some local private commercial banks (PCBs), including the PD banks, are now trading the securities through utilising excess liquidity aiming to minimise their cost of funds.
"We sold T-bills and bonds worth Tk 1.50 billion to both local and foreign commercial banks and insurance companies in a week," a senior official of a PCB said.
He also expects the trend to continue until the demand for credit picks up.
Currently, four treasury bills (T-bills) are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have 28-day, 91-day, 182-day and 364-day maturity periods.
Besides, two categories of the Bangladesh Bank bills are being used as tools to implement its monetary policy.
Four government bonds - 5-year, 10-year, 15-year and 20-year - are now being auctioned through the central bank.
The secondary market of government-approved securities is becoming active gradually to create a new window for investment by the financial institutions.
The commercial banks and non-banking financial institutions (NBFIs) now prefer investing in the government-approved securities like treasury bills (T-bills) and bonds mainly because of higher yield.
In the inter-bank market, the call rate maintained a steady trend ranging between 6.50 per cent and 6.70 per cent in the past couple of months indicating excess liquidity in the banking system.
On the other hand, the interest rate on 28-day T-bill, the lowest tenure government approved security, is now offered at 7.32 per cent.
Meanwhile, the central bank slashed the interest rate on 30-day Bangladesh Bank bill by 0.04 percentage points to 7.36 per cent from 7.40 per cent earlier, sources in the market said.
The primary dealers (PDs) earlier urged the central bank to re-fix the interest rates on the Bangladesh Bank bills to encourage the non-PD banks and NBFIs for participation in the auctions for the government approved securities.
Sources, however, said some local and foreign commercial banks are now trading the securities, particularly the T-bills to utilise their excess liquidity.
But some insurance companies are being investing their funds in the government bonds of particularly 5-year and 10-year tenures as long-term investment.
"We feel encouraged to invest in the secondary market of government-approved securities now. It will help develop the country's domestic financial market," a senior treasury official of a foreign commercial bank told the FE Wednesday.
He also said some banks are showing interest to trade on the securities in the market.
Besides, some local private commercial banks (PCBs), including the PD banks, are now trading the securities through utilising excess liquidity aiming to minimise their cost of funds.
"We sold T-bills and bonds worth Tk 1.50 billion to both local and foreign commercial banks and insurance companies in a week," a senior official of a PCB said.
He also expects the trend to continue until the demand for credit picks up.
Currently, four treasury bills (T-bills) are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have 28-day, 91-day, 182-day and 364-day maturity periods.
Besides, two categories of the Bangladesh Bank bills are being used as tools to implement its monetary policy.
Four government bonds - 5-year, 10-year, 15-year and 20-year - are now being auctioned through the central bank.