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NEPALESE DEBT MARKET

Sandesh Bhusal, Rashmi Lamsal, Sachita Ghimire, Seekha Rai, Saujanya Acharya

Bond Market?

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).

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.

Prospect of Nepalese Bond Market

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 is favorable to growth.

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.

Can go for less reliance on the foreign loans from the developmental agencies
Korean

Case Less foreign debt

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.

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 of active secondary market with brokers, it remained mostly at the hand of the central bank.

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.

Why trading of bond is low in Nepal

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 bond market. Almost all the corporate issuers are from banking sectors.

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 bond market capitalization. The government bonds are also not available in the stock exchange.