Bangladesh Bank is set to repurchase two-year government treasury bonds worth Tk 6,666.58 crore through a reverse auction on 7 October, as part of efforts to manage the government’s debt obligations ahead of the securities’ scheduled maturity next month.
The bonds were issued on 6 November 2024 and carry a coupon rate of 12.30 per cent. They are due to mature on 6 November 2026. The planned buyback will therefore take place about a month before the securities reach maturity.
Bangladesh Bank announced the auction on 5 October, saying the repurchase would be conducted under a multiple-price reverse auction mechanism. The settlement date for the accepted bids has been fixed for 12 October.
How the auction will be conducted
Primary dealer (PD) banks will be eligible to submit bids directly in the auction. Non-PD banks and financial institutions maintaining current accounts with Bangladesh Bank will be able to participate through the relevant PD banks.
Eligible institutions may submit competitive bids for securities held in their own accounts. They may also submit both competitive and non-competitive bids on behalf of their clients.
Each bid must state the price at which the participant is willing to sell the securities against a face value of Tk 100, as well as the quantity of bonds being offered.
Electronic bids must be submitted through Bangladesh Bank’s Financial Market Infrastructure (FMI) system between 10am and noon on the auction day. In special circumstances, participants may submit bids manually in sealed envelopes after obtaining prior approval from the central bank.
Repurchase aimed at easing repayment pressure
The planned buyback forms part of the government’s Liability Management Operation (LMO), which seeks to make public debt servicing more orderly and manageable.
The timing is particularly relevant because the bonds are due to mature on 6 November. If the entire outstanding amount were to become payable at maturity, the government could face a sizeable repayment obligation within a relatively short period. Repurchasing the securities ahead of maturity provides a mechanism to address part of that liability in advance.
The operation also gives eligible investors an opportunity to adjust their holdings before the scheduled maturity date. Bondholders who require liquidity or wish to rebalance their portfolios can offer their securities through the prescribed auction process.
Government treasury bonds are used as instruments for domestic government borrowing and are also held by banks and financial institutions as part of their investment and liquidity-management activities. The timing and size of maturities therefore matter for both public debt management and the wider government securities market.
Details of the securities
According to Bangladesh Bank, the securities involved in the auction have an outstanding value of Tk 6,666.58 crore. They were issued on 6 November 2024 with a 12.30 per cent coupon rate and are scheduled to mature on 6 November 2026.
The reverse auction will allow eligible participants to state the price at which they are prepared to sell the bonds back under the terms set by the central bank. As it is a multiple-price auction, accepted participants may settle at the prices corresponding to their accepted bids rather than at a single uniform price.
The settlement of accepted bids is scheduled for 12 October. The buyback is expected to reduce the amount of the relevant securities remaining outstanding before their scheduled maturity, helping the authorities manage the repayment obligation in advance.
For investors, the process creates a formal route to realise holdings before maturity, while for the government it provides an opportunity to manage a sizeable liability ahead of the November deadline. The operation is therefore being undertaken as part of broader efforts to maintain flexibility in public debt and government securities management.
