Trades in T-bills, bonds jump in secondary market

Trading of treasury bills and bonds in the secondary market soared by around 162 percent in the past two months mainly due to their higher interest rates compared to bank deposits and the stagnation of stock market indices.

Trading of these secured securities amounted to Tk 28,613 crore in November while it was Tk 10,932 crore in September, according to Bangladesh Bank data.

As the interest rate of fixed deposits of banks is below the yield of treasury bonds and bills, many investors prefer to invest in the risk-free instruments, said Mir Ariful Islam, managing director and chief executive officer of Sandhani Asset Management.

While the interest on fixed deposits is around 9-9.5 percent, the yield of many bonds is above 11 percent, making it a rational decision to invest in the latter, he added.

As people have a lack of trust in some banks and non-bank financial institutions, some big investors are preferring to invest in bonds that are backed by the government and risk-free.

"Besides, treasury bills and bonds are easier to liquidate as well," he added.

At the end of November, the yield rate for 91-day treasury bills, 182-day treasury bills and 364-day treasury bills was 10.5-11 percent, 11-11.2 percent and 11.1-11.4 percent respectively, as per central bank data.

The rate for 2-year treasury bonds, 5-year bonds, 10-year bonds, 15-year bonds and 20-year bonds was 10.1 to 10.2 percent, 10.3 to 10.35 percent, 10.97 to 11.1 percent, 11.14 to 11.18 percent and 11.19 to 11.23 percent respectively.

In January, the yield rate for 91-day treasury bills, 182-day treasury bills and 364-day treasury bills was 7.29 to 7.40 percent, 7.45 to 7.69 percent and 7.99 to 8.11 percent respectively, the data shows.

In the same month, the rate for 2-year treasury bonds, 5-year bonds, 10-year bonds, 15-year bonds and 20-year bonds was 7.90 to 8.20 percent, 8.29 percent, 8.30 to 8.33 percent, 8.69 to 8.75 percent and 8.89 percent respectively.

A top official of a stock brokerage said some big investors are investing in treasury bills and bonds as their yield rates rose over the past few months.

The rate is now at its highest level in the last few years, so the rate is lucrative as well as secured.

Moreover, the stock market is now the most illiquid market due to the floor price mechanism. As such, the investors do not want to keep their funds in stocks.

"So, as the secondary trading of treasury bills and bonds is now possible through the stock exchanges, some big investors are pouring their funds into them," he added.