Dhaka, Bangladesh (BBN) – The trading of government securities has dropped drastically in the secondary market recently against expectation of higher gains on the risk-free securities in the near future.
The government securities trading fell by over 59 per cent to BDT 20.79 billion in April-June of this year from BDT 50.97 billion in the same period of the previous calendar year, according to the market operators.
“We expect that transactions of the government securities would increase gradually in the secondary market,” a senior official of the Bangladesh Bank (BB) said, adding that the interest rates on the government securities have already increased slightly in the recent months.
Currently, three T-bills are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, four government bonds – 5-year, 10-year, 15-year and 20-year – are being traded on the market.
“Most of banks and non-banking financial institutions (NBFIs) are now maintaining a go-slow strategy following rising trend in interest rates on the government securities,” a senior treasury official of a commercial bank said.
The weighted average yield on 91-day treasury bills increased to 2.38 per cent in May this year compared to 2.34 per cent in April last, according to the central bank statistics.
The weighted average yield on 182-day treasury bills increased to 3.52 per cent in May compared to 3.42 per cent in the previous month while the weighted average yield on 364-day treasury bills also increased to 4.20 per cent from 4.15 per cent.
On the other hand, the weighted average yield on 10-year Bangladesh Government Treasury Bond (BGTB) increased to 8.78 percent in June, 2010 compared to 8.77 per cent in May last.
However, the weighted average yield on 15-year BGTB remained unchanged at 8.80 per cent in June last.
The treasury official also said primary dealer banks and NBFIs are facing devolvement pressure because the market is still limited within the banks and NBFIs.
“Our liquidity flow is being hampered following lower transaction of the government securities in the secondary market,” he said, adding that such trading activities would not help achieve the government desire for bringing dynamism in the secondary market.
The BB earlier selected 15 PDs – 12 banks and three NBFIs – to handle government-approved securities in the secondary market.
The PDs will subscribe and underwrite primary issues and make secondary trading deals with two-way price quotations.
A PD will not short-sell any particular issue and will not hold a short position in secondary dealings. The PDs will not act as inter-bank or inter-dealer brokers as specified in the guideline.
BBN/SS/SI/AD-30July10-8:52 am (BST)