Assignment on

GOVERNMENT TREASURY BILLS IN BANGLADESH

Semester- Spring 2012 F403: Financial Markets and Institutions MBA Program

Prepared for: Syeda Mahrufa Bashar Lecturer Institute of Business Administration

Prepared by: Md. Raihan Shourov Roll-139 Batch-MBA 46D

November 21, 2012

INSTITUTE OF BUSINESS ADMINISTRATION UNIVERSITY OF DHAKA

Money Market: The primary money market is comprised of banks, FIs and primary dealers as intermediaries and savings & lending instruments, treasury bills as instruments. There are currently 15 primary dealers (12 banks and 3 FIs) in Bangladesh. The only active secondary market is overnight call money market which is participated by the scheduled banks and FIs. The money market in Bangladesh is regulated by Bangladesh Bank (BB), the Central Bank of Bangladesh. Government Treasury Bills: Treasury bills and T-bonds are short-term and long term obligations issued by Bangladesh Bank on behalf of the government of Bangladesh. Pro-rata partial allotments are made for bids at the cut-off-yield. 15 primary dealers (PDs) are acted as underwriters and market makers with commitments to bid in auctions. Weekly auctions of 91-day, 182-day and 364-day treasury bills continued to be the main instruments for monetary policy management during the year under report. The objectives for issuing these securities are twofold. The first is to provide a mechanism for financing government deficit at a low cost and to use as a mopping-up instrument of excess liquidity prevailing in the market. T-Bills in Fiscal Year 2010-2011:

Table 1: Auctions of Government treasury bills - FY11

Bids offered Tenor of bills No. 334 345 372 Face value (billion Taka) No. 84.0 76.7 64.1 211 223 232 Bids accepted Outstanding bills as of end June Face value (billion 11 Taka) (Billion Taka) 58.5 54.4 40.2 53.3 1051 224.8 666 206.3 131.7 1.11-5.42 2.43-7.55 28.8 43.3 59.6 Yield range* (%) FY10 1.11-2.54 3.36-4.04 4.08-5.42 FY11 2.43-7.00 3.49-7.25 4.24-7.55

91-Day 182-Day 364-Day Devolvement to BB/PD Total

Source: Monetary Policy Department, Bangladesh Bank. * Range of the weighted average annual yield of the accepted bids.

The results of treasury bills auction in FY11 are summarised at Table 1. The auctions of 91-day, 182-day and 364-day tenor bills were mostly over-subscribed with bids, whereas the volume of devolvement to Bangladesh Bank/PDs decreased. The cut-off rate of most of the treasury bills increased during FY11. Depending on the liquidity conditions in the money market, the cut off yields of treasury bills of different maturities varied within wide ranges. The yields for various tenors as of end June 2011 depicted somewhat a moderate range than the yields as of end June 2010 (Table 1). A total of 1051 bids amounting to Taka 224.8 billion were received, of which 666 bids amounting to Taka 206.3 billion (including Taka 53.3 billion as devolved amount) were accepted. The weighted average yield-to maturity against the accepted bids ranged from 2.43 percent to 7.55 percent. In FY10 a total of 1476 bids amounting to Taka 417.0 billion were received, of which Taka 210.8 billion was accepted.

Current Scenario of T-Bill Auction:

Auction of T-Bills (As of November 2012):

Graphical Representation of cut off yield of accepted Govt. T-bills:

T-Bill Yield over the years:

Upcoming T-Bill Auction: