Dhaka, Bangladesh (BBN) – The central bank of Bangladesh is going to introduce a new calculation system for valuation of the holding of treasury bonds by the primary-dealer (PD) banks to help minimize any adjustment loss, officials said.
The valuation of treasury bonds, issued between April 2009 and October 2011 and categorized as ‘held for trading (HFT)’ by the PDs, may be re-assessed at an ‘amortized cost’, instead of the existing mark-to-market system, according to the proposed method.
Currently, four government bonds – 5-year, 10-year, 15-year and 20-year – are being traded in the market.
The proposal was made at a meeting with the chief executives and treasury heads of PD banks held at the central bank on Sunday with Executive Director of Bangladesh Bank (BB) SK Sur Chowdhury in the chair.
The central bank has sought opinions from the PD banks, to be submitted by the latter on or before January 18 in this connection.
“The treasury bonds, issued from 2009 to 2011, have lost substantially their marketability because of their low yields,” a BB senior official told BBN while explaining the reasons for their new proposal.
He also said it will help to ease liquidity constraints of the PD banks by increasing the yield on the treasury bonds at an acceptable level.
The BB has taken the latest move against the backdrop of a substantial amount of losses incurred by the PDs mainly on account of a lower yield on such bonds than the prevailing deposit rate in the market. This has been causing a lower rate of return on funds for the PD-banks than the rate they have to offer to the depositors under the existing market conditions.
The central bank of Bangladesh earlier selected 15 PDs — 12 commercial banks and three non-banking financial institutions (NBFIs) — to deal with government securities in the secondary market.
The PDs will subscribe and underwrite primary issues and make secondary trading deals with two-way price quotations.
BBN/SSR/AD-16Jan12-8:32 am (BST)