General investors show more interest in Treasury bonds now than even a few months ago, an outcome of the regulator's unwavering advocacy of risk-free government securities to diversify portfolios.
It seems the access created by the capital market watchdog to Bangladesh Bank auctions through brokers has started to bear fruits.
Treasury bonds are drawing more attention also at a time when yields have outstripped that of national savings certificates and fixed deposit receipts and when the equity market is highly volatile and has failed to raise much hope.
To cater to the new demand, brokerage houses are coming forward helping their clients invest in T-bonds. The intermediaries had little interest in participating in BB auctions for all the complications involved and for transactions not so rewarding but now they consider tapping into the market so to attract more clients and keep the existing ones with them.
"At workshops, we have been telling them [brokers] to make their clients aware of the perks of T-bonds. Now, the stock brokers are intensifying campaigns in the interest of their own and of clients," said Mohammad Rezaul Karim, spokesperson and executive director of the Bangladesh Securities and Exchange Commission (BSEC).
Following verbal instructions, stock brokers have begun publicity of Treasury bonds on social media platforms and official websites and through banners and festoons.
They have recently sent emails too to clients, notifying them of the opportunity to participate in the auctions.
Md Abdul Kader, a senior manager of corporate and intermediaries department of LankaBangla Securities, said the number of its clients with investments in T-bonds was about 10 before October last year but that recently crossed 150.
Despite the fact that a higher number of retail investors are injecting savings in government securities, brokers say the demand is still insignificant and that it has more room to expand.
That is because of, according to Mr Kader, retailers' lack of understanding about the revaluation of T-bonds and fluctuation of coupon rates when similar bonds are reissued.
Let's assume that the government has planned to raise Tk 10 billion by issuing T-bonds. In the first phase, the government has sold bonds worth Tk 5 billion offering an interest rate of 10 per cent.
In the second phase, the offer price of the units and interest rate will be determined based on the market demand and the government's urgency to get the fund.
If the demand is low but the government needs money immediately, it may hike the coupon rate.
In that case, the market price of the units issued earlier will decline if investors think of selling bonds in the secondary market, as the demand will shift to newer debt securities promising higher yields.
The whole thing can go in reverse if the bonds in the second phase offer a lower interest rate.
Md. Moniruzzaman, managing director of Prime Bank Securities, said investors would be able to make capital gains if they could rightly predict the direction of the financial market.
IDLC Investments in 2020 purchased Treasury bonds worth Tk 1.5 billion and later on bagged around 30 per cent capital gain, he added.
High net-worth individuals and corporate entities are far ahead of retail investors when it comes to taking advantage of the rising yields of T-bonds.
As per the guidelines of the securities regulator, investors are supposed to get T-bonds in their BO (beneficiary owner's) accounts within three days after the purchase in an auction.
But it takes about four days to get T-bonds transferred to investors' BO accounts. The central bank is trying to cut the time by fast-tracking the whole process.
Md Ashequr Rahman, managing director of Midway Securities, said smart investors were participating in at least one auction of T-bonds, considering the opportunity to lock their investments for a long time in government securities with high returns.
However, amid the interest rates of the debt securities going higher and higher, some investors have kept aside their savings with expectations that the return will go further up.
Hence, the demand may jump once they consider that the return has reached its optimum level.
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