Dhaka, Bangladesh (BBN)- The primary dealers (PDs) have planned to develop a secondary yield curve, generally known as interest rate, of the government securities to bring dynamism in the market, an executive said Tuesday.
The Primary Dealers Bangladesh Limited (PDBL) will initially develop the bench mark interest rate on government approved securities on the basis of trading data of the securities in the secondary market.
The yield curve is the relation between the interest rate or cost of borrowing and the time to maturity of the debt.
"We've planned to develop the bench mark interest rate on the government securities to facilitate primary dealers' banks and financial institution as well as individuals by providing such information on the securities," Chief Executive Officer (CEO) of the PDBL Belayet Hossain said.
Mr. Hossain, who is a former general manager of the Forex Reserve and Treasury Management Department of the Bangladesh Bank (BB), said the PDBL will request all commercial banks to provide information relating to secondary trading data of the government securities to develop an actual secondary yield curve.
Currently, yield curve of the securities is developed by the central bank on the basis of trading data in the primary auctions.
"Such yield curves are now used to determine the market value of the securities in line with the marking to market or mark to market system," the PDBL executive noted.
He also said the secondary yield curve will replace the existing one in the near future.
The central bank earlier introduced ‘marking to market system’ to bring dynamism in the country’s secondary securities market.
Marking to market or mark to market system is a process of calculation to determine the market value of an asset.
The central bank of Bangladesh has already selected nine PDs – eight banks and a non-banking financial institution (NBFI) – to handle government-approved securities in the secondary bond market.
BBN/SS/SI/AD-12August09-2:26 am (BST)