Scenario of Financial Market of Bangladesh:
* 72.19%, of domestic savings is stacked in the form of term deposits with the commercial banks. * Nationalized Commercial Banks (NCBs) dominates the banking sector accounting for 54.55% of public deposits. * Fixed income securities including non-transferable instruments constitute 27.81% of domestic debt. * Corporate debentures are only less than 1% of the debt securities market. * 20% of annual budget financed from internal debt in 199-2000
Structure of Bangladesh Financial Market:
Security Traded in Bangladesh Financial Market:
* Debt Securities:
Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount borrowed), interest rate and maturity/renewal date. Debt securities include government bonds, corporate bonds, CDs, municipal bonds, preferred stock, collateralized securities (such as CDOs, CMOs, GNMAs) and zero-coupon securities. The interest rate on a debt security is largely determined by the perceived repayment ability of the borrower; higher risks of payment default almost always lead to higher interest rates to borrow capital. Most debt securities are traded over-the-counter, with much of the trading now conducted electronically. The total dollar value of trades conducted daily in the debt markets is much larger than that of stocks, as debt securities are held by many large institutional investors as well as governments and non-profit organizations. Debt securities on the whole are safer investments than equity securities, but riskier than cash. Debt securities get their measure of safety by having a principal amount that is returned to the lender at the maturity date or upon the sale of the security. They are typically classified and grouped by their level of default risk, the type of issuer and income payment cycles.
Debt Security Traded in Bangladesh:
Bond: A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Interest on bonds is usually paid every six months (semi-annually).Bonds are used by companies, municipalities, states and governments to finance a variety of projects and activities. Bonds are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents. The main categories of bonds are corporate bonds, municipal bonds, and U.S. Treasury bonds, notes and bills, which are collectively referred to as simply "Treasuries". Two features of a bond - credit quality and duration - are the principal determinants of a bond's interest rate. Bond maturities range from a 90-day Treasury bill to a 30-year government bond. Corporate and municipals are typically in the three to 10-year range.
A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.
There are three types of govt. securities available in our country. Thus are I. Treasury Bill
II. Treasury Bond and
I. Treasury Bill:
A Treasury bill, or T-Bill, is a short-term investment issued by the Federal Government. T-Bills have maturities less than one year (usually one, three, or six months) and do not bear interest by coupon payments, but by discount. That is, the security is bought for less than the face value returned at maturity. On the other hand T-bill is a government obligation, sold at a discount, maturing in one year or less, and pays no interest prior to maturity. The denomination starts from about 1, 00,000 Taka, and...