Primary market bonds are newly issued bonds sold directly by the issuer — whether a corporation or government — to investors. The primary market is where bonds are born. When an entity needs to raise capital, it issues new bonds and sells them to investors through this market.
In the primary market, bonds are typically sold through auctions, especially government bonds. Investors like banks, financial institutions, insurance companies, and even individuals submit bids. The issuer then selects the best offers and allocates the bonds accordingly. Once sold in the primary market, these bonds can later be traded among investors in the secondary market.
In Bangladesh, Bangladesh Bank issues Treasury Bills and Bangladesh Government Treasury Bonds through auctions in the primary market on behalf of the government. Treasury Bills are short-term (91 days to 364 days) and issued at a discount.
Treasury Bonds, on the other hand, are long-term (2 to 20 years) and pay regular coupon payments. Investors can participate through primary dealer banks or brokerage houses. Primary market bonds — especially government bonds — are considered safe investments because repayment is guaranteed by the government.