Set to widen control of open market operation
Bangladesh Bank will take part in the secondary bond market on a regular basis as part of its open market operation in a bid to encourage the financial institutions and the individual clients to invest in the government securities, said officials of the central bank.
The banks, which are now holding the idle fund due to the sluggish business environment, will be able to purchase the treasury bonds easily to the central bank when the new BB initiative will be implemented, they said.
Besides, the banks, which will plunge in a cash reserve ratio shortage due to the liquidity crisis, will also sell their T-bonds to meet up their CRR with the central bank.
The individual clients will also trade the T-bonds with the central bank along with the financial institutions.
The central bank will make a final decision in this connection in a quickest possible time, said a BB official.
The new BB move may play an important role in making vibrant the country’s secondary bond market, he said.
Under the BB’s open market operation, the central bank is now controlling the country’s financial market through repurchase agreement, reverse repo, special repo, liquidity support facility and the 30-day BB bill.
Besides, the central bank participates in regularly in the trading activities of the foreign exchange with a view to stabilising the price standard of local currency taka against the foreign currencies.
The banks with huge idle fund continue to submit a large number of bids in the auction of treasury bills and T-bonds with a view to investing their fund although the government does not accept any bid excluding the auction calendar, he said.
The banks are now holding huge amount of liquidity due to a lower demand from the private sector resulting that they have to go to participate in the auction of the government securities to invest their idle fund, he said.
The central bank will sell and purchase the T-bonds through the secondary bond market with the existing market interest rate of the securities.
In the unveiling session of the monetary policy statement on Monday, BB governor Atiur Rahman said that the central bank had taken fresh measures to make attractive the country’s bond market.
The new initiative to make vibrant the secondary bond market is a part of the current central bank’s monetary stance.
The central bank usually purchases and sells the T-bills and T-bonds with the financial institutions after a long distance.
According to the BB data, the central bank sold 5-year T-bond worth Tk 166 crore on January 5 from Sonali Bank and Standard Chartered Bank as the banks are now holding significant amount of surplus liquidity.
Before that, the central bank participated in the secondary bond market in May 2011.
The BB department concerned, which is involved in monitoring the secondary bond market, is now not allowed to sell or purchase the T-bonds without prior approval from the top management of the central bank.
The department will be able to purchase or sell the T-bonds from and to financial institutions and the individual clients without taking prior permission from the top management when the new initiative will be taken.
BB executive director Sudhir Chandra Das told New Age in last week that the central bank would sell the T-bonds from its holding securities.
The new initiative will get tempo as the clients are now more eager to invest in the T-bills and T-bonds, he said.
Under the circumstances, the country’s secondary bond market will be vibrant more in the days to come.
-With New Age input
