Dhaka, Bangladesh (BBN)– The central bank of Bangladesh has issued guidelines on buy-back of the government securities aiming to bring dynamism in the secondary market.
Under the new provisions, the buy-back programme will be operational through reverse auction or over the counter (OTC) transaction as per auction calendar determined by the Finance Division.
On behalf of the government, the Bangladesh Bank (BB), the country’s central bank, issued terms and conditions to implement the overall buy-back programme, according to a circular, issued by the BB on Tuesday.
“To keep pace with the other countries of the world, the government is going to take buy-back programme of the government securities for balancing the redemption profile and reducing the number of government securities,” the central bank said in the circular.
The buy-back of treasury bills or bonds will be accomplished in the face value of Taka one lakh or multiple of Taka one lakh and all banks and non- banking financial institutions (NBFIs), which maintain current accounts with Bangladesh Bank, can participate directly in the buy-back programme.
All other resident or non-resident individuals and institutions, who have no current accounts with the central bank, can participate in the auction through the banks and NBFls.
In case of OTC, price will be determined through negotiation between Bangladesh Bank and the securities seller. The negotiated price and accrued interest of the securities will be payable to the sellers of the securities.
In case of reverse auction, multiple price based method will be followed. On the basis of auction result, the settlement price and calculated accrued interest will be paid to the banks or non-bank financial institutions by crediting the current accounts maintained with the BB.
The bids will be opened at 1:00 pm and result of the auction will be announced by 3:00 pm on the same day. Each and every institution can offer different price for each security. In this case, separate bids have to be submitted for different price.
Bidders can offer price in discount or premium or face value based on the market price. Winner bidders will be paid their offered price and accrued interest calculated from issue date of original bills or bonds or last coupon date to previous date of buy-back.
The government bought back its securities worth BDT 11.16 billion in the fiscal year (FY) 2007-08 and FY 2009-10, according to the BB officials.
Currently, four treasury bills (T-bills) are being transacted through auctions to adjust government borrowings from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years respectively are traded on the money market.
The central bank earlier had selected 20 PD banks to deal in government securities on the secondary market.