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Regulator to increase supply of T-bonds in secondary market

FE REPORT | June 06, 2023 00:00:00

In a fresh move to increase supply of Treasury bonds in the secondary market, the securities regulator has allowed beneficiary owner (BO) account holders to purchase T-bonds in primary auctions conducted by the central bank.

Investors, however, will have to make the purchases through brokerage firms.

Bond trading is yet to get momentum eight months after it began on the stock exchanges.

The Bangladesh Securities and Exchange Commission (BSEC) has already prepared a "process flow" on how to take part in the auction.

It has made the move after discussions with the related parties, such as Bangladesh Bank (BB), Dhaka Stock Exchange, Chittagong Stock Exchange and Central Depository Bangladesh, according to a statement issued on Sunday.

The development opens up opportunities for general investors to purchase Treasury bonds worth Tk 100,000 or its multiples in primary auctions.

Individual investors will then trade the bonds in the secondary market, helping the bond market thrive.

The regulator talked to the central bank regarding fixing a quota in primary auctions for general investors.

The BB may issue a circular in this regard very soon, a BSEC official said.

Increasing accessibility of T-bonds in the secondary market is definitely a good decision, said Prof Abu Ahmed, a former chairman of the economics department of the University of Dhaka.

"The regulatory move will enhance the supply side and make the bond market vibrant by diversifying the product base," he added.

Treasury bonds are a good investment opportunity for safe and fixed interest income received semi annually until maturity. The government debt securities help investors offset the volatility of equity prices.

A large number of T-bonds yield more than what bank deposits return nowadays. This makes such bonds a lucrative asset.

Individual investors will be able to diversify their portfolios, with a boost to T-bonds trading in the secondary market, said Dr. Suborna Barua, professor at the Department of International Business at the University of Dhaka.

"This will help reduce investment risk."

In the eight months to April this year, only 18 trades involving Tk 50 million of T-bonds took place.

Mohammad Rezaul Karim, spokesperson and executive director of the BSEC, earlier said the commission had been working on the supply side as the demand was already there.

Currently, general investors are unable to buy T-bonds since banks and other financial institutions hold almost all of those and are reluctant to sell the bonds on the stock exchanges.

Primary Dealers (PDs) can place bids in auctions conducted by the central bank, and other institutions purchase the bonds from PDs through secondary trading.

There are 243 Treasury bonds listed on the stock exchanges, with tenures ranging from 2 to 20 years. They pay at the rate of 2-15 per cent annually against the face value of Tk 100 each bond.

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