Trading in treasury bills began yesterday on the secondary market of the Dhaka Stock Exchange, ending a wait of more than a decade and creating yet another investment tool for retail investors relying solely on stocks and mutual fund.
Some 222 government bonds, with a combined value of Tk 55,000 crore, were listed on the country’s premier stock exchange between 2005 and 2011. But they were not traded like stocks and mutual fund units. because there was no secondary market.
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Problems with the settlement of Treasury bill trading and a higher tax had prevented government securities from being traded on the stock exchange. All issues have now been resolved, paving the way for retail investors to participate in the negotiation.
A 10-year Bangladesh Treasury bond transaction was executed as a test case yesterday between VIPB Accelerated Income Unit Fund and Alliance MTB Unit Fund.
Both the regulator and institutional investors were delighted.
“I have been waiting for the day since I joined BSEC,” said Shaikh Shamsuddin Ahmed, commissioner of the Bangladesh Securities and Exchange Commission (BSEC).
“There had been a lot of ups and downs, but eventually we got there,” he said, speaking at an event marking the start of treasury bill trading. .
“Individual investors will now be able to buy and sell treasury bills.”
At present, there are 264 treasury bills valued above 2.5 lakh crore Tk with terms ranging from two to 20 years, according to central bank data.
Their trade has so far been concentrated within the interbank ecosystem under the Bangladesh Bank Market Infrastructure Module. Currently, government bonds are traded among institutional shareholders, including banks and financial institutions.
Although an investor could still participate in the buying and selling of securities through treasury bill investment accounts, the process was complex. As a result, the bond market in Bangladesh was largely dormant until yesterday.
A committee made up of officials from the central bank, the DSE and the BSEC worked to remove all barriers to the introduction of treasury bills on the stock market.
BSEC commissioner Prof Mizanur Rahman said a strong secondary market for treasury bills would reduce the government’s borrowing costs in the long run.
“Listing and trading government bonds on the stock exchange will attract other institutional investors and high net worth individuals to invest in this class of securities.”
“It will help the government to issue bonds with lower yields.”
According to Rahman, retail and institutional investors will now be able to avoid overvalued stocks and protect their capital by investing in risk-free government bonds. Manipulative stock operations will decrease over time.
A secondary market for government and corporate bonds is an important step towards developing the market for derivatives and other financial instruments, he added.
“This is surely a great time for the capital market as it will lead to an increase in the depth of the market,” said Shahidul Islam, CEO of VIPB Asset Management Company.
“So far we have been able to trade treasury bills through banking. We can now trade through the stock market.”
Existing Treasury bond investors have their holdings in participating depository accounts with the Bangladesh Bank. They will now have to transfer the assets to a BO account to be able to sell them on the stock market.