Bond Market

Bond Market before independence, the use of bonds as a means of resource mobilisation was virtually non-existent. Immediately after liberation, the government of Bangladesh reissued long-term bonds accepting the liabilities of the Income Tax Bonds and the Defense Bonds of Pakistan government held by Bangladeshi nationals and institutions. The government also issued a 5% non-negotiable bond to Bangladeshi shareholders of nationalised industries. In addition, savings bonds were also issued to pay for the value of demonetised 100-taka notes in 1974. Most of these bonds are held by bangladesh bank.

The first effort to mobilise savings for use of development expenditure was the issue of Wage Earners Development Bonds in 1981 to be sold to Bangladeshi wage earners abroad. Later, a two-year special treasury bond was issued in January 1984 to be sold to individuals, public and private sector organisations including banks. In December 1985, another instrument, the National Bond, was issued to be sold to non-bank investors.

During the implementation period of the financial sector reform programme that took effect from 1990, nationalised commercial banks, specialised banks and development financial institutions had to make considerable provisions for huge classified loans. As a result, the capital base of those banks and financial institutions eroded severely and their viability was seriously threatened. In this situation, the government issued a series of bonds to restructure the capital base of these banks and financial institutions as well as to assume the liabilities of the bad loans made to a number of public sector organisations.

List of Government Issued Bills, Bonds and Certificates up to 2021

Sl	Government Securities	Rate of Interest/Profit	Balance (billion BDT) June, 2021
1.	5-Year Bangladesh Government Investment Sukuk (Ijarah Sukuk)	Auction Yield	80.0
2.	2-Year Bangladesh Government Treasury Bond	Auction Yield	440.0
3.	2-Year (FRTB) Bangladesh Government Treasury Bond	Auction Yield	5.0
4.	5-Year Bangladesh Government Treasury Bond	Auction Yield	566.5
5.	10-Year Bangladesh Government Treasury Bond	Auction Yield	865.7
6.	15-Year Bangladesh Government Treasury Bond	Auction Yield	416.2
7.	20-Year Bangladesh Government Treasury Bond	Auction Yield	385.9
8.	12,13,14,15-Year Bangladesh Petroleum Corporation (BPC) Bond	5%	18.2
9.	11-Year BJMC Treasury Bond-2023	5%	6.0
10.	13-Year BJMC Treasury Bond-2024	5%	7.2
11.	10-Year SPTB-2023 BPC	7%	19.4
12.	7-Years SPTB-2026 Hanif Flyover	5%	19.9
13.	Prize Bond	-	6.5
14.	5-Year Wage Earners Development Bond	12%	123.6
15.	3-Year National Investment Bond		0.3
16.	3-Year US Dollar Premium Bond	7.5%	2.8
17.	3-Year US Dollar Investment Bond	6.5%	21.9
18.	5-Year Bangladesh Sanchayapatra		388.2
19.	Paribar Sanchayapatra		798.4
20.	3-Month Interest Bearing Sanchayapatra		592.6
21.	Pensioners' Sanchayapatra		204.6
22.	Jamanat Sanchayapatra		0.03
23.	3-Year Sanchayapatra		0.16
24.	14, 91, 182 & 364-Day Bangladesh Government Treasury Bill	Auction Yield	512.7
	Total		5481.7

Source Bangladesh Bank and Ministry of Finance.

Islamic Shariah-based investment bonds were introduced in October 2004 for Bangladeshi individuals and organizations and non-resident Bangladeshis interested in investing on a profit-loss sharing principle. These bonds of 6 months, 1 year and 2 years are very effective in Shariah-based liquidity management in the banking industry.

Government Treasury Bonds (BGTBs) of 5 years, 10 years, 15 years and 20 years, bearing 6-month coupon rates, are introduced as a tool for long-term financing of government expenditure programs from internal sources. These bonds have been issued since 2007 at multiples of each unit at face value on the basis of yield through auction held at Bangladesh Bank. Individuals and resident entities can also purchase these bonds.

The most significant event in the history of the bond market in Bangladesh is the beginning of bond trading in the secondary market from January 10, 2005. Initially, 18 bonds were listed in the Dhaka Stock Exchange for trading. It is to be noted that Bangladesh Bank has appointed primary dealers for the development of the bond market of the country and so far 22 primary dealers are freely selling the bonds issued in the auction. Primary dealers receive the required liquidity assistance from Bangladesh Bank due to lack of funds.

Despite the limited size of the bond market, the secondary bond market has started working on a limited scale. Issued bonds are mostly held by state owned commercial banks. Financial institutions are obligated to maintain a statutory liquidity ratio called SLR with the central bank in the form of central government or central bank bonds. In this regard, financial institutions purchase and keep those in the central bank as non-negotiable known as unencumbered nature. However, now bond holders can easily en-cash their bond through secondary bond market

Marketability of bonds issued in the country is very limited. The bulk of these bonds is held by the nationalised commercial banks. The few specialised and some private banks hold a part of them. Individuals and non-bank financial institutions also hold some of these bonds. Therefore, the main market of these bonds so far is being provided by the banks which hold them due to the government allocation system, as well as to maintain statutory liquidity requirements (SLR). Many of these bonds are non-negotiable. As there is no secondary market in the country, the holders of these bonds have to wait till the date of maturity for their encashment. [Syed Ahmed Khan and A Samad Sarker]