Dhaka, Bangladesh (BBN) - Reverse auction for buy-back of the government securities started on Wednesday without accepting any bids, officials said.
Only three primary dealer (PD) banks took part in the first reverse auction held at the central bank headquarters in Dhaka with submitting their bids worth around BDT 80 billion but no bids were accepted.
“The auction committee did not accept the bids mainly due to insignificant amount,” a senior official of the Bangladesh Bank (BB), the country’s central bank, told the BBN in Dhaka.
He also said the committee is yet to fix the date for next auction.
Terming as unfortunate, a senior executive with a PD bank said state-owned commercial banks (SoCBs) should take part in the first auction through submitting their bids for making the new process of buy-back successful.
At least three SoCBs out of six along with a leading private commercial bank are now holding excess securities of the government, according to the PD bank executive.
The Ministry of Finance (MoF), the central bank of Bangladesh and the PD banks worked for more than last two years for developing the multiple price-based reserve auction for buying back the government securities.
Market insiders, however, said the holding of excess government securities decreased in the recent months following negative borrowing by the government from the banking system.
The government’s net bank borrowing is still at a negative level, amounting to BDT 169.80 billion as on April 05, mainly due to higher growth in the saving-certificate sales, according to the central bank’s confidential report.
Under the proposed bank borrowing, the government will borrow BDT 208.87 billion through issuing long-term bonds while the remaining BDT 73.16 billion through treasury bills (T-bills).
Besides, the MoF had suspended auctions of the government securities in the month of February this calendar year to ensure proper cash management.
Excess holding of the government securities by 12 leading PD banks came down to BDT 207.73 billion in February 2018 from BDT 223.26 billion in May 2017, according to the Primary Dealers Bangladesh Limited (PDBL) statistics.
The market insiders said such buy-back will help the government cut its expenses on interest payments against its securities and also contribute to jacking the secondary market up in Bangladesh.
Currently, four treasury bills (T-bills) are being transacted through auctions to adjust the government’s borrowings from the banking system. The T-bills have 14-day, 91-day, 182-day and 364-day maturity periods.
The T-bills are short-term investment tools issued through auctions, conducted by the central bank on behalf of the government.
Furthermore, five government bonds, with tenures of two, five, 10, 15 and 20 years respectively, are traded on the market.
The central bank of Bangladesh had earlier selected 20 PD banks including eight fourth-generation banks to deal in government securities in the secondary market.
BBN/SSR/AD