Professional Documents
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BOND MARKET IN
PAKISTAN
(opportunities,
hindrances and
suggestions)
Introduction of Bond Market
The bond market also known as the debt, credit, or fixed income market is a financial
market where participants buy and sell debt securities usually in the form of bonds.
Background
Bond markets play an important role in mobilization of capital. The investments are very
necessary for economic development of a country. A good market will help promote
economic growth and reduce the risk of financial crises. To improve the efficiency of the
bond market what can be done is that financial market regulation and supervision should
be strengthened, market infrastructure should be enhanced, new investments
areas(products) for better mobilization of savings and improvement of investor bases.
((Developing Bond Markets in APEC - Toward Greater Public-Private Sector
Regional Partnership)))
The bond market is composed of Pakistan investment bonds, corporate bonds, Sukuks
and commercial paper. Overall this market is 5% of GDP at the moment which is very
small as compared to other economies. (((bond market development in Pakistan by
Muhammad Arif 2007)))
Increasing the competitiveness and efficiency of the financial system, which here is
dominated by large banks. At micro economic level development of securities market
helps change the financial system from bank-oriented system to multi layered system
where capital markets can complement bank financing.
Enhancing the stability of the financial system by creating alternatives to banks, that will
reduce the power of banks simply
It provides a resort for domestic funding and budget deficits other than by central bank
Bond market helps in the implementation of monetary policy, including achievement of
monetary targets or may be inflation objectives
The development of bond market can force the financial intermediaries to develop other
products like Repo, Structured finance and Derivatives.
Cost of debt servicing can be reduced through funding of Government Budget deficits on
market-oriented funds.
(((PeerPapers.com)))
T-Bills
The bills are issued at a discount. The investors are required to quote the price at which
they are willing to buy t-bills of Rs.100 face value. Individuals, institutions and corporate
bodies including banks/DFIs are eligible to purchase the bills. The principal and profit
accrued thereon is guaranteed by the government. Principal and profit is payable on
maturity. T-bills can be traded freely and are transferable by endorsement and delivery.
Tax is deducted at source under the Income Tax Ordinance 1979.
Opportunities ????