The tenure of assured liquidity support (ALS) to primary dealer (PD) banks against government-approved securities extends as a measure to manage the funds efficiently, officials say.
Under the latest provision, the dealer banks are allowed to enjoy the ALS facility for three consecutive months instead of the existing two- month timeline, according to a notification issued Thursday by the Bangladesh Bank (BB).
The PDs are eligible for such liquidity support against both securities devolved on them as well as purchased through successful biding in primary auction for a maximum period of three months from the date of issuance of such securities, the officials explain.
"We've extended the ALS for the PDs to help them manage their funds smoothly," a BB senior official told the FE while explaining the main objective of the measure.
The central banker also says it will encourage the PDs to offer bids for the government-approved securities in the primary auction.
The dealer banks welcomed the latest BB move, saying that the measure would help slightly to bring dynamism in the primary as well as secondary markets.
"It should be differentiated between treasury bills (T-bills) and Bangladesh Government Treasury Bonds (BGTBs)," a senior member of the Primary Dealers Bangladesh Limited (PDBL) told the FE, without elaborating.
The PDBL earlier had urged the central bank to enhance the tenure of ALS for both T-bills and BGTBs to help in management of the funds properly.
The association had proposed to the central bank that the ALS might be allowed up to three months and 12 months from issue date for T-bills and BGTBs respectively instead of the existing tenure of two months.
The central bank earlier had selected 21 PDs to manage the government-approved securities on the secondary market.
The same day, the BB rearranged the list of benchmark securities aiming to announce a market-based yield curb on the government-approved securities shortly.
"We're working on the issue," another BB official said, adding that such yield curb will help minimize fluctuation in the valuation of the securities.
Currently, three T-bills are being transacted through auctions to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
Furthermore, five government bonds with tenures of 02, 05, 10, 15 and 20 years are traded on the market.
siddique.islam@gmail.com