How it works
Bangladesh Bank, the central bank, sells the bonds at auction on behalf of the government. You buy a bond for a given amount; the government pays interest at a fixed rate (the coupon) every six months and repays the principal at maturity.
A Tk 100,000 bond with a 10% annual coupon pays Tk 5,000 in interest every six months. After 10% tax deducted at source, you receive Tk 4,500.
Five tenors
The longer the tenor, the longer your money is tied up, and the larger the price swings can be if you sell before maturity.
Selling before maturity: the price seesaw
A treasury bond cannot be redeemed early, but it can be sold to another investor on the stock exchange. The price you get then depends on prevailing market interest rates.
Because buyers can earn more from a new bond.
Because your bond’s coupon now compares favourably.
If you hold the bond to maturity, these price movements do not affect your principal.
Two ways to buy
Why people choose it
- Repayment is the government’s obligation.
- Regular interest every six months.
- A rate can be locked in for a long term.
Points to weigh
- The auction minimum is Tk 100,000, in multiples of that amount.
- No early redemption; before maturity you must sell at the market price.
- The auction rate changes every time.
Check before you buy
- Can I leave the money invested until maturity?
- If I need to sell early, can I accept a possible loss?
- If buying through a broker, do I know the commission and BO account charges?
- Have I submitted proof of filing my tax return, so that tax is deducted at source at the correct rate?