Secondary trading of T-bills, T-bonds drops by 45pc

Asjadul Kibria | Wednesday, 10 January 2018

Secondary trading of treasury bills and treasury bonds, two short-and long-term fixed income government securities, declined steeply last year.
Latest statistics of the central bank showed that the total turnover of secondary trading of T-bills and T-bonds stood at Tk 282.91 billion in 2017 while the value was Tk 514.08 billion in 2016.
Thus annual value of secondary trading of T-bills and T-bonds declined by 45 per cent within a year.
Secondary trading of T-bills and T-bonds takes place in regular auctions through primary dealers. Treasury Bills or T-bills are short-term government securities while Bangladesh Government Treasury Bond (BGTB) or T-bonds are long-term government securities.
Currently, 20 commercial banks performing as primary dealers participate directly in the primary auctions. Other bank and non-bank investors can participate in primary auctions and in secondary trading through their nominated primary dealers.
"The main reason for decline in trading of treasury bills and bonds is lower demand for these securities," said Dr Ahsan H Mansur, Executive Director of the Policy Research Institute of Bangladesh (PRI).
"The government is borrowing heavily through savings instruments and so the market for treasury bills and bonds are shrinking," he told the FE.
Total outstanding of savings instruments stood at Tk 2124.08 billion at the end of November 2017.
In fact, savings certificate dominates the country's fixed income securities market as more than 50 per cent of the outstanding amount of fixed income securities belong to four types of certificates. These are: five-year Bangladesh Savings Certificate, Quarterly Profit-bearing Savings Certificate, Family Savings Certificate and Pensioner Savings Certificate.
Dr Mansur was of the view that market mechanism is almost absent in secondary trading of treasury bills and bonds.
Non-resident individuals and institutional investors can also participate in primary and secondary market, but only in treasury bonds.
Central bank statistics also showed that yield rates of treasury bills and treasury bonds increased modestly in 2017.
Yield rates of 91-day, 182-day and 364-day T-bills stood at 3.38 per cent, 3.86 per cent and 4.35 per cent respectively by the end of December (December 26 to be precise).
The rates were 2.97 per cent, 3.14 per cent and 3.53 per cent respectively in the month of January last year.
Again, weighted average rates of treasury bonds with different tenures also increased moderately.
In this connection, Dr Mansur observed that yield rates of all these bills and bonds are quite lower compared to the yield rates of savings certificates.
Currently, average yield rate of savings instruments is estimated at 10.50 per cent.
"The modest rise in the yield rates of treasury bills and bonds recently reflects slight tightening of the market," he added.
He also mentioned that deposit rate is now increasing slowly as banks and financial institutions have to finance the loans and advances.
Yield rate for 2-year Bangladesh Government Treasury Bond (BGTB) increased to 5.03 per cent by the end of December from 4.23 per cent in January last year.
The rates for 5-year and 10-year T-bonds increased to 5.90 per cent and 7.17 per cent from 5.79 per cent and 6.65 per cent respectively during the period under review.
Again, weighted average yields on 15-year and 20-year BGTB stood at 7.93 per cent and 8.25 per cent respectively in December, 2017 which were 7.47 per cent and 7.78 per cent in January the same year.
The central bank data further showed that weighted average yield on 30-day BB bill remained the same at 2.97 per cent throughout the year except in June and July when it dropped to 2.96 per cent.

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