• Wednesday, Jan 27, 2021
  • Last Update : 07:14 pm

BSEC shakes secondary bond market out of stupor

  • Published at 12:11 am November 30th, 2020
BSEC headquarters
Headquarters of the Bangladesh Securities and Exchange Commission in Dhaka's Agargaon Syed Zakir Hossain/Dhaka Tribune

Gives nod to allow trading of govt securities to BO accountholders, meaning about 25 lakh people can invest in Treasury Bills and Treasury Bonds that are until now traded by banks, NBFIs, insurers and corporations

The country’s moribund secondary bond market got a shot in the arm after the securities regulator on Sunday allowed treasury bonds to be traded through the beneficiary owner’s (BO) accounts. 

The instructions have been dispatched to resolve all legal issues within the next week.

The decision came at a tripartite meeting, which was presided over by Shaikh Shamsuddin Ahmed, a commissioner of the Bangladesh Securities and Exchange Commission. Officials from the finance ministry, the Bangladesh Bank, the twin bourses and the Central Depository Bangladesh Limited (CDBL) were present at the meeting held at the DSE Bhaban in the capital.

The securities regulator is trying to get the general public to be able to trade treasury bonds of maturities of two, five, 10, 15 and 20 years and treasury bills (T-Bills) of maturities of 91, 182 and 364 days in the secondary market. 

T-Bills are free of credit risks and tradable in the secondary market. In fiscal 2017-18, T-Bills worth $7 billion were issued. The cut-off yield for T-Bills increased by approximately 5 per cent in fiscal 2017-18 from a year earlier. 

Only the primary dealers can submit bids in the auctions. At present, 20 banks are performing as PDs;

the other institutions and individuals can submit bids in the auction but through the PDs. 

Currently, 221 T-bonds are listed at Dhaka bourse, and they are mainly purchased by banks, non-bank financial institutions, insurance companies and corporations. 

In Bangladesh, there is no secondary market activity of the bonds and it makes the bond market almost non-functional.

“As a result, about 25 lakh people will have the opportunity to get involved with it,” Ahmed said.

A flourishing bond market will open up new scope and opportunities for financing mega projects in public and private sectors, he said quoting Finance Minister AHM Mustafa Kamal.

The BSEC move would now go some way towards achieving that, Ahmed said.

“I welcome this move,” said Abu Ahmed, an honorary professor of the Dhaka University’s economics department.

But there should be specific directives for introducing a secondary bond market where government-sponsored bonds can be traded.

This will encourage the private sector to issue more bonds for raising capital for long-term investment, he added. 

A total of 221 treasury bonds are listed on the stock exchange. Treasury bonds of five, 10 and 15 years of tenure began to be listed on the Dhaka bourse from 2005.

The BSEC arrived at the decision based on the 13 recommendations made by a tripartite committee to facilitate the trading of government securities in the secondary market of the stock exchanges. 

The nine-member committee is headed by Khurshid Alam, general manager of the BB’s debt management department, and comprises of officials of the BSEC and the Dhaka Stock Exchange.

The committee suggested that the government provide policy support to engage non-resident Bangladeshis in the country’s bond market and give fiscal support for the investors for the development of the secondary bond market.

The vibrant trading of government securities in the secondary market will create price discovery and ultimately would reduce the cost of government borrowings as it will reduce the dependency on high interest-bearing the national saving certificate (NSC). 

Besides, this will increase the capacity of supplying credit to the private sector. 

“It will not be possible to achieve the development goals depending only on bank financing,” a committee member told Dhaka Tribune requesting anonymity.

 

 

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