Money market instruments in Bangladesh perspective as well as worldwide............

Money market instruments in Bangladesh perspective as well as worldwide

Money market instruments play a significant role in the financial systems of both Bangladesh and worldwide. These instruments provide short-term financing options, facilitate liquidity management, and offer relatively low-risk investment opportunities. Let's explore the perspective of money market instruments in Bangladesh and globally in more detail:

Bangladesh Perspective:

In Bangladesh, the money market is regulated and overseen by the Bangladesh Bank, the central bank of the country. The money market instruments available in Bangladesh include Treasury Bills, Bangladesh Bank Bills, Commercial Paper, Repurchase Agreements, and the Call Money Market.

Treasury Bills: The government issues Treasury Bills with various maturities, typically 91 days, 182 days, and 364 days, to finance its short-term borrowing requirements. These bills are considered safe investments and are actively traded in the secondary market. Banks, financial institutions, and individual investors can participate in Treasury Bill auctions to invest their surplus funds.

Bangladesh Bank Bills: The Bangladesh Bank also issues short-term bills, known as Bangladesh Bank Bills, to control the money supply in the economy. These bills are primarily used for monetary policy purposes and are available for scheduled banks to manage their liquidity. Banks can buy and sell Bangladesh Bank Bills in the secondary market to adjust their short-term liquidity positions.

Commercial Paper: Commercial Paper is issued by corporations in Bangladesh to meet their short-term funding needs. These instruments are typically available to well-established companies with good credit ratings. Commercial Paper provides an alternative source of financing for corporations, and investors can purchase these papers to earn returns while ensuring short-term liquidity.

Repurchase Agreements: Repurchase agreements, or repos, are commonly used in Bangladesh for short-term liquidity management. Banks and financial institutions engage in repos to borrow funds by selling securities, usually Treasury Bills or Bangladesh Bank Bills, with an agreement to repurchase them at a later date. Repos allow institutions to access short-term funds while providing collateral in the form of marketable securities.

Call Money Market: The call money market in Bangladesh enables scheduled banks to lend and borrow funds from each other for very short durations, typically overnight. This market helps banks manage their daily liquidity requirements efficiently. Banks with excess funds can lend in the call money market, while banks in need of funds can borrow to meet their short-term liquidity needs.

 

Worldwide Perspective:

Money market instruments are widely used globally to manage short-term financing needs and mitigate risks. While specific instruments and their characteristics may vary across countries, the core purpose remains consistent. Here are some common money market instruments used worldwide:

Treasury Bills and Government Securities: Governments issue short-term debt instruments, such as Treasury Bills, to finance their budgetary needs. These instruments are considered highly secure, as they are backed by the respective governments' creditworthiness. Treasury Bills and government securities are actively traded in money markets worldwide, providing investors with a low-risk investment option.

Commercial Paper: Commercial Paper is issued by corporations internationally to raise short-term funds. It offers investors an opportunity to invest in the debt of creditworthy companies while maintaining liquidity. Commercial Paper typically has a maturity of 1 to 270 days and is an important source of short-term funding for corporations.

Certificates of Deposit: Certificates of Deposit (CDs) are offered by banks globally, providing investors with a safe and low-risk investment option. CDs have fixed maturity dates and interest rates, making them popular among risk-averse investors. They are insured by deposit insurance schemes in many countries, such as the Federal Deposit Insurance Corporation (FDIC) in the United States.

Repurchase Agreements: Repurchase agreements are prevalent worldwide, allowing institutions to borrow or lend funds against the collateral of government securities or other eligible assets. Repos provide short-term liquidity and are commonly used in money markets to manage short-term funding needs.