FE Report

The local money market remained vibrant throughout the year. Both banks and non-bank financial institutions widely participated in call money trading, term money trading, swaps, repo/ reverse repos and most importantly secondary trading of government securities.

According to the 2009 review on Bangladesh financial markets by Standard Chartered Bank, Bangladesh Bank actively used its monetary management tools including repo/reverse repo and buy back of securities to keep the market stable.

The year marked a major downtrend of interest rates where government securities yield curve dropped by 3.11- 6.82 per cent. Other bench mark rates including repo/reverse repo was also cut by 400 basis points (bps) to 4.5 per cent and 2.5 per cent respectively by Bangladesh Bank.

In a bid to create further depth and dynamism in the secondary market for government securities, the central bank appointed 4 new Primary Dealers (PDs) increasing them to 13.

There was also significant progress towards creating an inter-bank benchmark yield curve similar to that of LIBOR in UK. Banks are quoting inter-bank rates for DIBOR (Dhaka Inter-bank Offered Rate) since beginning of 2009 and the market expects further depth in 2010. Going forward DIBOR may be used as a tool to quote to bank's customers.

The US Dollar strengthened globally in

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