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Development of Bond Market in PAKISTAN

Development of Bond Market in PAKISTAN

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Published by: wajji12345 on Apr 14, 2010
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03/10/2015

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DEVELOPMENT OFBOND MARKET INPAKISTAN(opportunities,hindrances andsuggestions)
 
Introduction of Bond Market
The bond market also known as the debt, credit, or fixed income market is a financialmarket 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 verynecessary for economic development of a country. A good market will help promoteeconomic 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 investmentsareas(products) for better mobilization of savings and improvement of investor bases.
((Developing Bond Markets in APEC - Toward Greater Public-Private SectorRegional Partnership)))
The bond market is composed of Pakistan investment bonds, corporate bonds, Sukuksand commercial paper. Overall this market is 5% of GDP at the moment which is verysmall as compared to other economies.
(((bond market development in Pakistan by Muhammad Arif 2007)))
Significance of Bond Market for Pakistan
Bond market is of great significance to a country that faces large budget deficits, likePakistan. Generally a well developed bond market is important for these reasons:Increasing the competitiveness and efficiency of the financial system, which here isdominated by large banks. At micro economic level development of securities markethelps change the financial system from bank-oriented system to multi layered systemwhere capital markets can complement bank financing.Enhancing the stability of the financial system by creating alternatives to banks, that willreduce the power of banks simplyIt 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 objectivesThe 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 onmarket-oriented funds.
(((bond market development in Pakistan by Muhammad Arif 2007)))
Further I can say development of local bond market provides:
Diversification of financial sector into equity, debt and bank financing
Effective allocation of capital competition in financial sector 
Supports infrastructure development, privatization, securitization, and the rise of new institutional investors requiring long term assets to match long term liabilities
Reduces the currency, interest rate and funding exposures risks
Allows more efficient allocation of savings by reducing banks role that alsoreduces the element of political interference
Allows borrowers to use capital that is tailored to their assets and operations
Provides retail and institutional investors with several high quality and liquiddomestic saving vehicles.(((PeerPapers.com)))
Objectives of Bond Market
To establish a free market that encourages the widest participation of ownershipin enterprises
A free market that regulates itself 
Enhance the democratization of wealth
Promote the development of the capital market
Protect investors
Ensure full and fair disclosure about securities
Minimize insider training and keep the market efficient up to the possible limit

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