Secondary market bonds are bonds that trade between investors after their initial issuance in the primary market. While the primary market is where bonds are first sold and the issuer receives funds, the secondary market is where existing bonds change hands. Money from secondary market trades goes to the selling investor, not the original issuer.
The main purpose of the secondary market is to provide liquidity to bondholders. If an investor wants their money back before a bond matures, they can sell it in the secondary market for cash. Bond prices in the secondary market are determined by supply and demand, which depends on market interest rates, the issuer's credit quality, and the bond's remaining maturity. When market interest rates rise, bond prices typically fall, and vice versa.
In Bangladesh, there is a secondary market for Treasury Bills and Bangladesh Government Treasury Bonds. These are traded through stock exchanges or over-the-counter dealer markets. While Bangladesh's bond secondary market is not yet as developed or liquid as the stock market, it is gradually growing. The government aims to make this market more active so investors can trade bonds easily and it can become an effective source of long-term financing.