The Bangladesh Bank is planning to make bond market vibrant and attractive to investors by putting pressure on nine primary dealers to play more active role.

Despite offering higher returns on investment than long-term bank deposits, bond market has failed to get desired response from potential investors, central bank officials said.

They partly blamed the financial institutions engaged as primary dealers for the poor response. Since bonds are not easily convertible like other assets, investors might have been less enthusiastic about them, they also felt.

The primary dealers — Sonali, Janata, Agrani, Prime, Uttara, National Credit and Commerce Bank, Jamuna and Southeast banks and International Leasing — are not considering the bond market as another earning window, a central bank official said.

These financial institutions have so far taken little initiative to lure investors into bond trading although it offers return ranging between 10.5 and 13.88 per cent in five to 20 years’ time.

So far, only one person bought Tk 3 crore bonds from the primary market, central bank data showed.

Any individual is allowed to buy government bond, which pays interest or coupon after every six months and it is of Tk 1 lakh denomination or its multiplier, from the primary or secondary market through any bank.

‘Bond should be attractive to long-term investors as it gives more return than that of the fixed deposits in banks,’ another central banker said.

Illiquid nature and lack of awareness and knowledge make bond less popular among potential of investors.

‘One cannot sell bond easily like shares on the market,’ he said.

It is difficult to calculate bond price as coupon payment is made in future while principal amount is given at the end of maturity.

‘Value of money decreases due to inflation and a person without very good knowledge about finance cannot calculate the prices of bonds,’ he explained.

Bond market is very suitable location for life insurance fund as it can invest money for policy period and earn interest and principal both until the bond is matured, the official said.

The central bank sells bills to overcome short-term cash mismatch of the government. The mature periods for bill are 28-day, 91-day, 182-day and 364-day, which all divisible by 7.

The treasury bonds are sold to meet budget deficit and long-term government financing. The mature periods are 5 years, 10 years, 15 years and 20 years.

The range of yield or profit for 5-year bond is 10.50 per cent to 10.65 per cent, for 10- year bond 11.72 per cent to 11.74 per cent, for 15-year 12.93 to 12.94 per cent and for 20-year 13.87 to 13.88 per cent.

The central bank holds auction for treasury bonds every week and anybody can bid for it through any bank. The auction committee fixes bond interest rate and it is applicable throughout the bond’s life, which means that buyers will get interest payment at the rates fixed by the committee.