Public-oriented debt instruments have failed to tempt general investors as the public possesses less than one-tenth of such bonds issued in the last half decade.
In the last five fiscal years, only eight per cent of the total issue of public oriented bonds were subscribed. From fiscal year 2008-09 to 2012-13, Nepal Rastra Bank (NRB) had issued National Savings Bond, Citizens Saving Bond and Foreign Employment Bond worth Rs 19.5 billion of which the public holds bonds worth a mere Rs 1.76 billion, according to central bank statistics.
Despite attractive yields and low risk, the performance of such bonds has been washed out as investors are less aware and not very interested in them.
The latest bunch of National Savings Bond 2075 worth Rs 800 million, launched in December 2013, also did not get fully subscribed. Likewise, the Foreign Employment Bond 2075-KA also saw a mere 10 per cent of the total offering worth Rs 250 million getting subscribed by migrant workers and returnees.
According to NRB data, there are Rs 946 million worth of National Savings Bond, Rs 755 million worth of Citizens Saving Bond and Rs 58.8 million worth of Foreign Employment Bond in possession of the public.
“Since bonds are not easily tradable in the market like equities, investors prefer to stick to stock trading,”informed stock analyst Rabindra Bhattarai.
Development bonds worth Rs 22.4 billion that are listed at the stock exchange have never seen the trading floor. They are quite popular among institutional investors such as financial institutions and Employees Provident Fund, Citizens Investment Trust and insurance companies.
“In the absence of a market maker, it is not easy for investors to shift from bonds to equities and vice versa, so only a limited number of investors who are willing to freeze their funds in bonds for a medium term are engaged in buying these securities,” pointed out Bhattarai.
Generally, the tenure of government securities stands at around five years but provide coupon rates of above eight per cent. Bonds are fixed income securities that are considered relatively risk free as people are lending to the government that rarely go bankrupt.
Two years back, even when the stock market was crawling near the bottom at 300 points, public oriented bonds had a hard time getting subscribed. Likewise, when the fixed deposit rates offered by banks were near six per cent these bonds had offered higher rates but still failed to attract public attention.
“NRB is considering introducing Primary Dealership System for bonds to tackle the pathetic subscription rate,” informed a high official at NRB’s Public Debt Management Department.
In primary dealership, government securities are directly sold to entities known as primary dealers that bid for government bonds competitively to resell them to others, thus acting as a market maker of government securities.
“Primary dealership system is supposed to stimulate the bond market and entry of more players in dealing with bonds will increase the participation of general investors in government securities,” pointed out the official.
Moreover, the Finance Ministry is working with the Asian Development Bank to promote the bond market in Nepal.
source:the himalayan times,15 Jan 2014
LINK
In the last five fiscal years, only eight per cent of the total issue of public oriented bonds were subscribed. From fiscal year 2008-09 to 2012-13, Nepal Rastra Bank (NRB) had issued National Savings Bond, Citizens Saving Bond and Foreign Employment Bond worth Rs 19.5 billion of which the public holds bonds worth a mere Rs 1.76 billion, according to central bank statistics.
Despite attractive yields and low risk, the performance of such bonds has been washed out as investors are less aware and not very interested in them.
The latest bunch of National Savings Bond 2075 worth Rs 800 million, launched in December 2013, also did not get fully subscribed. Likewise, the Foreign Employment Bond 2075-KA also saw a mere 10 per cent of the total offering worth Rs 250 million getting subscribed by migrant workers and returnees.
According to NRB data, there are Rs 946 million worth of National Savings Bond, Rs 755 million worth of Citizens Saving Bond and Rs 58.8 million worth of Foreign Employment Bond in possession of the public.
“Since bonds are not easily tradable in the market like equities, investors prefer to stick to stock trading,”informed stock analyst Rabindra Bhattarai.
Development bonds worth Rs 22.4 billion that are listed at the stock exchange have never seen the trading floor. They are quite popular among institutional investors such as financial institutions and Employees Provident Fund, Citizens Investment Trust and insurance companies.
“In the absence of a market maker, it is not easy for investors to shift from bonds to equities and vice versa, so only a limited number of investors who are willing to freeze their funds in bonds for a medium term are engaged in buying these securities,” pointed out Bhattarai.
Generally, the tenure of government securities stands at around five years but provide coupon rates of above eight per cent. Bonds are fixed income securities that are considered relatively risk free as people are lending to the government that rarely go bankrupt.
Two years back, even when the stock market was crawling near the bottom at 300 points, public oriented bonds had a hard time getting subscribed. Likewise, when the fixed deposit rates offered by banks were near six per cent these bonds had offered higher rates but still failed to attract public attention.
“NRB is considering introducing Primary Dealership System for bonds to tackle the pathetic subscription rate,” informed a high official at NRB’s Public Debt Management Department.
In primary dealership, government securities are directly sold to entities known as primary dealers that bid for government bonds competitively to resell them to others, thus acting as a market maker of government securities.
“Primary dealership system is supposed to stimulate the bond market and entry of more players in dealing with bonds will increase the participation of general investors in government securities,” pointed out the official.
Moreover, the Finance Ministry is working with the Asian Development Bank to promote the bond market in Nepal.
source:the himalayan times,15 Jan 2014
LINK
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