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NEPALESE DEBTMARKETSandesh Bhusal, Rashmi Lamsal, SachitaGhimire, Seekha Rai, Saujanya Acharya
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Bond Market?
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Bond Market
Bonds are the long term debt obligations issued
by corporation and government units.
Proceeds from bond issue are used to raise
funds to support long term operations of the
issuer (e.g. for capital expenditure projects).
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Bond Market
In return for investors fund, bond issuers
promise to pay a specified amount in the future
on the maturity of the bond (face value) plus
coupon interest on the borrowed funds.
Bond markets are the markets in which bonds
are issued and traded.
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Prospect of Nepalese Bond
Market
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Prospect of Nepalese Bond
Market
Reduce their borrowing cost, contain financial
risk, and develop their domestic debt market.
Leads to overall macroeconomic policy
framework which safeguards stability and isfavorable to growth.
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Prospect of Nepalese Bond
Market
More than 65% of domestic debt has
maturities of one year or shorter, and less than
9% of domestic debt has maturities of 10 years
or longer. The bulk of the cheap foreign loans have
maturities of longer than 30 years and account
for more than 57% of the financing of the
budget deficits in Nepal.
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Can go for less reliance on the foreign loans
from the developmental agencies
Korean Case
Less foreign debt
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Problems of Nepalese Bond
Market
There is a fluctuation in interest rate in bond in
Nepalese market which is one of the reasons
behind the investors distaste to invest in
bonds. To attract investors to the bond market,
interest in bond should be stable.
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Problems of Nepalese Bond
Market
Treasury bill market is a major component of
money market in Nepal, started in the year
1961-62.
But, because of low yield and absence ofactive secondary market with brokers, it
remained mostly at the hand of the central
bank.
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Problems of Nepalese Bond
Market
Lack of coordination with the International
Market.
It would be easier to access the funds in the
international market. Brokers specialized in the Bond Trading.
High transaction costs.
Lack of liquidity. Lack of Awareness.
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Why trading of bond is low in Nepal
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Issues in bond market in Nepal
Both the government and corporate bond are
issued in Nepalese bond market.
Financial market in Nepal is dominated by
bank and financial institutions.
The bond market itself is not well developed in
terms of both transaction in secondary market
and capital market size covered by the bondmarket.
Almost all the corporate issuers are from
banking sectors.
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The corporate bond participation is small in
size in size as compared to government bond
The corporate bond market only represents
approximately 20 percent of the total bondmarket capitalization.
The government bonds are also not available
in the stock exchange.