COURSE : Money and Financial Market

Presentation

GROUP INTRODUCTION

NAME ID & BATCHNasrin Sultana 2548/42cChandrima Majumder 2543/42cSujan Chandra Kor 2551/42cS. M. Saifur Rahman 2552/42cBidhan Biswas Shawan 2563/42c

Treasury Bills(T-bills) Treasury Bills (T-bills) are the most marketable money market secu-

rity.

T-bills are a way for the government to raise money from the public.

T-bills are short-term securities that mature in one year or less from

their issue date.

T-bills are purchased for a price that is less than their par (face)

value;

when they mature, the government pays the holder the full par value.

Effectively, we interest is the difference between the purchase price of

the security and what you get at maturity.

The main features of T-bills

Three tenors are available namely 91 day, 182 day and 364 day.

Price is determined by the market.

They are issued at a discount and redeemed at the face value at ma-

turity.

Tradable in the secondary market Issued in scrip less form.

The central Bank releases monthly calendar through BB website.

Who issued T-bills:

As per agreement between the The Government of Bangladesh and Bangladesh Bank in 1985 (Treasury rules-1998 (Appendix-1, Section-3) and Bangladesh Bank (BB) Or-der-1972,article 20 empowers BB to issue new loans and man-age public debt for the Government.

How T-bill issued:

Weekly (usually on Sunday) auctions of Treasury Bills are held following a pre-an-nounced auction calendar with a specified amount. Bidders quote their prices. The Auc-tion Committee determines the cut-off price from the offered prices.

Who can place bid in the auctioned:

Primary Dealers (PDs) can place bids in auction. Other commercial banks and Non-Bank Financial institutions, Insurance companies, corporate, individuals, provident fund etc. can also participate in auction through PDs.

The minimum bid amount in an auction:

For Bangladesh the Minimum bid amount is Taka one lakh and its multiples.

Primary Dealers (PDs): Primary Dealers are financial institutions that act as underwriters of government securities in primary auction. Auction Committee can de-volve securities on Primary Dealers (PDs) in case they find the offered bids unacceptable. PDs receive periodic underwriting commission on successful bids and devolved amount. 

The number of PDs are in Bangladesh:  There are 20 PDs in Bangladesh. In Bangladesh Commercial Banks acts as a PD.

How T-bills are auctioned by Bangladesh bank:   First, the Bangladesh Bank will issue a notice indicating how much money it would like to borrow. The length of the borrowing for this particular auction is less than 1 year. That means we give the government some money and 1 year later the government will give we back your money and a little extra. The difference between what we paid and what we receive back is the yield, which is usually expressed as a percentage.  The announcement indicates the date of the auction as well as dead-lines for competitive and noncompetitive bids. If we would like to partici-pate in the auction then our bids must be submitted before these times.

The auction announcement details – Amount of the security being offered.Auction date.Issue date.Maturity date.Terms and conditions of the offering.Noncompetitive and competitive bidding close times.Other pertinent information.

Bidding -1.Competitive Bid 2.Noncompetitive Bid 

The bids are filled in the following manner – All the noncompetitive bids are filled first. Once all the noncompetitive bids are filled then the competitive bids are filled next start-ing from the highest max price and proceeding to the lowest until the issue is completely fulfilled.At the close of an auction, Treasury awards all noncompetitive bids that comply with the auction rules and then accepts competitive bids in ascending order of their rate, yield, or discount margin (lowest to highest) until the quantity of awarded bids reaches the offer-ing amount. All bidders will receive the same rate, yield, or discount margin at the highest accepted bid.

THE END