Bangladesh retired Tk1,716 crore of government debt on Thursday through its first-ever bond buyback auction, purchasing two-year Treasury bonds just 28 days before maturity at a cut-off yield of 7 per cent.
Bangladesh Bank conducted the auction on behalf of the Finance Division as the government introduced a new debt-management tool to spread repayment pressures, reduce refinancing risk and make the debt maturity profile more balanced.
The operation came as government bond yields have been easing. Earlier this week, two-year Treasury bonds were issued at a yield of 8.2499 per cent, down from 8.8685 per cent in the previous auction.
A higher yield reflects a lower price for a bond.
A buyback allows the government to repurchase outstanding securities before maturity rather than wait for the full amount to fall due at once.
The Finance Ministry said the bond buyback, used internationally as part of liability management operations, would also help improve the efficiency of the government securities market and make public debt management more active, modern and market oriented.
The Finance Division has been implementing reforms aimed at balancing the cost and risks of government borrowing, ensuring sustainable debt management and developing the government securities market.
The ministry said the first buyback marked an important step in that reform agenda and was aligned with the government’s Medium-Term Debt Management Strategy (MTDS).
Similar operations may be carried out in future depending on market conditions, the government’s cash position and debt-management needs.
Future buybacks would also take into account market liquidity, investor demand and the structure of government debt, the ministry said.
