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T-Bill in Bangladesh
T-Bill in Bangladesh
Treasury bill or T-bill is a short-term debt issued by a national government with a maximum
maturity of one year. Treasury bills are sold at discount, such that the difference
between purchase price and the value at maturity is the amount of interest. Although the maturity
of T-bill shouldn't be more than one year, in Bangladesh, 2-year and 5-year securities are also
regarded as T-bills. Treasury bills are fully guaranteed by the government and hence are free
from default risk. The biggest reason that T-Bills are so popular is because they are one of the
few money market instruments that are affordable to the individual investors. Basically, investors
invest in T-bills due to:
1) maintain the Statutory Liquidity Reserve (SLR),
2) maintain adequate liquidity
3) earn yields
4) utilize properly huge idle cash in banks, and
5) Safe guard their investments.
Since they mature so quickly, T-bills are simply sold at a discount to their face value at maturity.
The discount is determined by the interest rate. If it is a six-month bill with a 5% discount rate,
the investor pays 95% of the face value or Tk. 950, and then receives Tk. 1,000 back in six
months. T-bills are indirect tools for monetary management of the central bank of a country. Six
types of T-bills are available in Bangladesh: 28-day, 91-day, 182-day, 64-day, 2-year, and 5-year
government treasury bills are duly issued by the Bangladesh Bank through weekly auctions at
rates determined by the market.
Instrument
91 Days
182 Days
Treasury Bill
364 Days
5 Year
10 Year
15 Year
Treasury Bond
20 Year
Issue
date
Tenor
and
name
Bids received
No
Face
Range
of
value of yields
bids (Cr.Tk. (%)
)
11
450
11.2311.50
15.04 91
.12
days
T.Bill
Source: Bangladesh Bank Websiteiii
No of
bids
Face
value
(Cr.Tk.
)
57.48
Bids accepted
Sale
Range
Weighted
value
of yields average
(Cr.Tk.) (%)
Price (taka)
Cut off
yield (%)
55.91
11.2302
11.23
97.28
For the T-Bill market, Bangladesh Bank works as an agent of the Bangladesh Government. TBills are usually issued on a bi weekly basis. That is twice every month. On the whole, T-bills
are mainly used to satisfy statutory liquidity requirements (SLRs).
the organized segment at the stock exchanges. The Central Depository Bangladesh Ltd
(CDBL) acts the depository function for all securities including government securities
and corporate bonds.iv
OTC segment: The BB has selected twelve banks and three non-bank financial institution as
primary dealers (PDs) to handle secondary transactions of T-bills and other government bonds.
All the other banks other than the PDs and NBFIs participate in the secondary market to
purchase T-Bills from the dealers.
Mu, Y. (2007, July 14). South Asia Bond Markets: Bangladesh. World Bank: Working Paper Series. Report.
Retrieved April 22, 2012 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=999713.