The New Nation - Internet Edition

ACCORDING to a recent newspaper report, 'a number of initiatives' have been taken to activate the secondary bond market which remained dysfunctional since its inception in 2005 depriving the capital market of the expected gains and benefits. Since its inception at the Dhaka bourse on January 1, 2005, only a treasury bond lot was transacted on the secondary market. The Dhaka Stock Exchange held a meeting recently to identify the deterrents to secondary bond trading and the meeting was attended by the representatives from the Finance Ministry, Bangladesh Bank, the Securities and Exchange Commission, Central Depository Bangladesh Ltd. and primary dealers of treasury bonds as reported by the media. The meeting named a number of issues that should be resolved immediately to create an active secondary bond market. In fact, no capital market can reach maturity without a strong bond market.

Issues like the tax on turnover for government bonds to be revised as stated by a representative of the Finance Ministry 'to create an effective secondary treasury bond market'. There was also assurance that the government would consider the tax issue on brokerage turnover to bring the transaction charges on bonds down to a reasonable level. The Dhaka Stock Exchange reportedly informed the meeting that it, too, was ready to reduce the brokerage charges on bond transaction to a reasonable level. The meeting, however, proposed that treasury bond trading should be held 'on the spot market' of the bourse until 1.00 PM to facilitate same-day settlements. In reference to the meeting, it was stated that the stock exchange should advise its authorised banks to issue country's central bank cheques for guarantees and same-day settlements of bond transactions. There was also proposal that every primary dealer should appoint at least one broker to place orders through the bourse and the primary dealers with the support of the brokerage houses shall increase the marketing of government bonds to the investors. However, there was proposal moved by representatives from the Bangladesh Bank and the primary dealers for creating a separate window for offering all relevant information on the secondary bonds.

Earlier, the central bank selected eight banks and a non-banking financial institution as primary dealers to handle the government-approved securities on the secondary bond market and issued a guideline for them. The nine primary dealers entitled to deal in treasury bonds are the state-owned lenders - Sonali, Janata and Agrani banks, private sector banks - Prime, Uttara, Jamuna, Southeast and National Credit and Commerce, and lease financier - Industrial Development Leasing Company. Currently government bonds of 5-year, 10-year, 15-year and 20-year maturities are being traded on the market. However, in the light of the deliberations and decisions at the meeting, effective steps should be taken immediately to activate the bond market.