Bangladesh Bank will auction Tk4,000 crore worth of government Treasury bonds on Tuesday, allowing banks and other eligible investors to lend money to the government in exchange for interest.
The auction will reissue 10-year treasury bonds originally issued on 25 May 2022 and maturing on 25 May 2032, leaving 5.61 years until repayment, according to a central bank notice issued on Monday.
Treasury bonds are government-issued debt securities. Investors buy them to lend money to the government, receive interest and recover the face value when the bonds mature.
The bonds to be auctioned on Tuesday carry an annual coupon rate of 8 per cent, meaning the government pays Tk8 a year for every Tk100 of their face value.
However, the 8 per cent coupon is not necessarily the investor’s actual rate of return, known as the yield.
That return depends on the price paid for the bond. If investors buy a bond below its Tk100 face value, their yield generally rises above the coupon rate. If they pay more than Tk100, their yield falls below it.
The bonds’ remaining maturity of 5.61 years means investors buying them now will have to wait until 25 May 2032 to receive their face value from the government, while collecting scheduled interest payments.
Only banks appointed as primary dealers in government securities can submit bids directly to Bangladesh Bank.
Other banks and finance companies can participate through the dealers on behalf of individual and institutional investors who do not maintain current accounts with the central bank.
Bidders must state both their offered price and the amount of bonds they want to purchase.
Bangladesh Bank will accept bids through its Financial Market Infrastructure (FMI) system from 10am to noon on Tuesday.
In exceptional circumstances, manual bids in sealed envelopes may be submitted with prior approval.
