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Issuer of G-Sec:
Government securities are issued on behalf of the government. As a part of the government’s debt manager, the Debt Management Department of Bangladesh Bank is responsible for providing functional and advisory services to the government on matters related to government’s debt management policy and the issuance of various treasury instruments as per Bangladesh Bank Order 1972, article 20 and Treasury Rules 1998 (Appendix 1, Section 3).
Types of G-SEC:
1) Treasury Bills; 2)Treasury Bonds:
Who Can Invest :
How to Trade:
Tradable government securities are issued through auctions. Auction calendar is published periodically by Bangladesh Bank with the approval of Ministry of Finance. Auction notice is provided as per auction calendar.
Weekly auctions of T-bills (usually on Sunday) and BGTB (usually on Tuesday) of a particular tenor are held regularly following a pre-announced auction calendar for a specified amount.
Bidders quote their acceptable price/yield. The auction committee determines the cut-off price/yield from the offered yields.
Auction Methods:
There are two methods of auction: uniform price auction and multiple price auction.
In a uniform price auction, all the successful bidders are required to pay the allotted quantity of securities at the same rate, i.e., at the auction cut-off rate, irrespective of the rate quoted by them.
On the other hand, in a multiple price auction, the successful bidders are required to pay for the allotted quantity of securities at the respective price/yield at which they have bid. In Bangladesh government securities are auctioned in multiple price auction.
Bidding Amount:
Minimum bid amount is BDT 100,000. Bids can be submitted for an amount of BDT 100,000 and its multiples.
Cut-off Yield:
It is the rate at which bids are accepted. Bids at yields higher than the cut-off yield is rejected and those lower than the cut-off are accepted. The cut-off yield is set as the coupon rate for the security. Bidders who have bid at lower than the cut-off yield pay a premium on the security, since the auction is a multiple price auction.
Cut-off Price:
It is the minimum price accepted for the security in an auction. Bids at prices lower than the cut-off are rejected and at higher than the cut-off are accepted. Coupon rate for the security remains unchanged. Bidders who have bid at higher than the cut-off price pay a premium on the security, thereby getting a lower yield. Price based auctions lead to finer price discovery than yield based auctions.
Govt. Bond Trade in Secondary Market:
Tradable government securities, which have been issued through auction can be traded in the secondary market. Bangladesh Bank has initiated to automate the process of trading and settlement of government securities transactions in October 2011. The secondary market of government securities of Bangladesh is comprised of Over the Counter (OTC) and Trader Work Station (TWS).
Prematurely Encashed:
No, government securities cannot be encashed before maturity. However, holders of tradable government securities can sell government securities in the secondary market.
How to invest in G-SEC/BGTB:
An interested investor open a BP ID from Bangladesh Bank through GMF Securities Ltd (TREC-186). Investor can participate in auction, buy/sell tradable government securities from/in the secondary market through GMF Securities Ltd (TREC-186).
Open A BP ID (A/c):