T-bonds a lucrative investment
People in Bangladesh can simply invest their funds in Treasury bonds (T-bond), because of a couple of initiatives taken by the central bank recently.
T-bonds are securities issued by the federal government with a maturity period which range from two years to twenty years. Bondholders earn interest twice a year until they reach maturity.
Earlier, individuals faced huge complexities in buying the bonds because of the absence of a captivating secondary bond market and complicated rules and regulations.
The secondary bond market may be the place where investors can purchase and sell bonds.
The arises from the sale of bonds in the secondary market visit the counterparty, which could be an investor or a dealer. In contrast, money from investors goes directly to the issuer in the principal market.
A person or an institution is allowed to invest a minimum of Tk 1 lakh and above to take pleasure from the investment opportunity on the instruments.
There is absolutely no ceiling on the amount which can be invested, drawing investors. Besides, individual investors get tax rebate against their investments.
Clients now can invest their funds through the federal government securities investment windows of 44 banks and two non-bank financial institutions (NBFIs).
Individuals and institutions need to open a "government securities investment account" with the banks and the NBFIs to help make the investment. The interest provided by the federal government is deposited at the client's account.
The address and contact number of the officials focused on helping the investors are available on the websites of the respective banks and NBFIs.
YOUR DEBT Management Department of the central bank also supplies the information to investors to this end.
The interest on the T-bills varies as the coupon rate is fixed through auctions organised in the primary market.
The central bank holds several primary auctions on a monthly basis as part of its efforts to supply required funds to the government. The interest rate is set during the auction.
The rates usually change in the secondary market according to the demand. For instance, if a customer invests Tk 1 lakh on a bond at 5 % interest, they will conclude with less profit during sales if the rate in the principal market increases.
In that situation, the main amount of the bond will be adjusted by calculating the interest, which is earned later on.
If the rate declines in the primary market, investors will love an improved profit while selling the instrument to other clients.
The interest levels on the T-bonds ranges between 2.68 % and 6.64 %, compared to 7.84 per cent and 8.99 % this past year. There are five types of T-bonds categorised according to their maturity periods.
The rates have declined drastically within the last year as the demand for government securities in the secondary bond market has truly gone up in the wake of a declining trend of the interest on the deposit products offered by banks.
Nearly all banks now offer 3 % to 4 % interest on fixed deposit schemes.
Investment in the government securities in the secondary bond market stood at Tk 118,908 crore in February, up 213 % year-on-year.
