Govt repurchases Tk1,716cr bonds in first-ever treasury buyback

In a landmark shift for public debt management, Bangladesh held its first treasury bond buyback today (8 October), repurchasing Tk1,716 crore in two-year Treasury bonds before maturity to ease repayment pressures and lower refinancing risks.

The Bangladesh Bank conducted the buyback auction on behalf of the Finance Division, according to a finance ministry press release.

The bonds, originally issued on 4 November 2024, drew strong interest from 20 participating commercial banks, a senior Bangladesh Bank official said.

A total of 56 bids valued at Tk2,016.14 crore were submitted, with the auction committee ultimately accepting Tk1,716.14 crore in line with its benchmark rates, according to a central bank press release.

The buyback introduces a new debt-management tool for Bangladesh, designed to smooth the maturity profile of government debt and reduce the number of bonds in the market.

As a key instrument in international Liability Management Operations (LMO), government securities buybacks allow sovereign issuers to repurchase existing securities from the market before their maturity to optimise their balance sheets.

The finance ministry said the initiative would help reduce the pressure of making large, one-off repayments when government debt matures, while lowering refinancing risks and creating a more balanced debt repayment schedule.

When several government bonds mature around the same time, the government may have to repay a large amount of money at once. Buying back some of those securities before maturity can reduce the amount of debt falling due during a particular period.

This can ease pressure on the government's cash position and reduce the need to raise new funds or refinance large amounts of debt to meet repayment obligations.

The Finance Division said it was undertaking various reforms to balance the cost and risks of government borrowing, ensure sustainable debt management and develop the government securities market. The first buyback operation is part of those initiatives.

It said similar operations could be conducted in future in line with the Medium-Term Debt Management Strategy (MTDS).

The timing and volume of future buybacks, however, will depend on market conditions, the government's cash position, market liquidity, investor demand and the overall structure of government debt.

The government aims to make public debt management more active, modern and market-based while keeping repayment pressures and refinancing risks associated with large amounts of debt falling due in the future under control, the Division said.