Bond marketing in bangladesh assignment
Bond marketing in bangladesh assignment
The government also Issued some bonds for augmenting loan able funds for specialized bank sand financial Institutions. Moreover, some bonds were also Issued to mobile funds for a number of public sector organizations Like the T&T Board, Bangladesh Bambina etc. Types of bonds: On the basis of Variability of Coupon: Zero Coupon Bonds Zero Coupon Bonds are issued at a discount to their face value and at the time of maturity, the principal/face value is repaid to the holders.
No interest (coupon) is paid to the holders and hence, there are no cash inflows in zero coupon bonds. The difference between issue price (discounted price) and redeemable price (face value) itself acts as interest to holders. 2. Floating Rate Bonds In some bonds, fixed coupon rate to be provided to the holders is not specified. Instead, the coupon rate keeps fluctuating from time to time, with reference to a benchmark rate. Such types of bonds are referred to as Floating Rate Bonds. These bonds are known as Inverse Floaters and are common in developed markets.
Securities bearing zero and fixed coupons, and bonds following Islamic Shari only are available currently in Bangladesh. Bonds like Treasury Inflation Protected Securities (TIPS), Islamic Bonds(SKU Bond), High-yield Bonds (HUB), and Deep Discount Bonds may help formation of corporate bonds market in Bangladesh. Bond Market Participants of Bangladesh: One of the preconditions of being efficient bond market is the existence of large number of market participants. Market participants can be divided into issuers, investors and intermediaries. 1.
Issuers: Most private sector enterprises are small and owner- run, many are of “ cottage size” and MO stare in the garment industry, which to date depends largely on short-term bank loans for financing. These enterprises could benefit from longer-term funding but are neither large enough nor well known enough to issue bonds. Most of the large-scale industrial units and commercial enterprises are state owned. Their shares are not listed, and they do not offer debentures since their financing needs are met by the government or by the state-owned NCSC.
Lower effective rate of interest for not being able to be compounded. No change in interest rate with the increase in inflation rate. Reduces tax burden since interest is shown as a charge. Protecting firms from the exposition to the market volatility 2. Benefits of Investors: Pays higher interest rates than savings. Offers safe return of principal. Have less volatility than the stock market. Offers regular income. Requires smaller initial investment. Highly liquid 3. Benefits of Intermediaries: Large spread can be exploited. High commission/fees. Phenomenal growth opportunities.
Cut down policy of commercial lending brings opportunity for broadening bandmaster base. Market Interest Rates and Bond Prices: Once a bond is issued the issuing corporation must pay to the bondholders the bond’s stateliness’s for the life of the bond. While the bond’s stated interest rate will not change, the market 6 interest rate will be constantly changing due to global events, perceptions about inflation, and many other factors which occur both inside and outside of the corporation. The following terms are often used to mean market interest rate: effective interest rate 2. O maturity discount rate 4. Sired Cost of bond issuance in Bangladesh bond market: To issue new bonds in Bangladesh is very much formal which includes huge amount of oversubscribing fees. It greatly affects the issuance of bond in Bangladesh. The following is list of considering factor. 1. Securities and Exchange Commission registration. Publication of prospectus Printing of prospectus and application Certificate, post issue, postage 5. Listing fees 6. Issue manager or underwriter 7. Trustee fee 8. Credit rating , bankers, legal and audit 9. Central depository fee Regulators and Regulations of Bangladesh bond market:
It said that Indian’s nods amounted to 35 per cent of GAP while Napalm’s domestic bonds were 15 per cent. As a per cent of GAP, South Asian equities account for 77 per cent, banking assets around 61 percent and bonds for only 34 per cent. While India dominates all three markets, Sir Lankan bond market accounts for almost 51 per cent of its GAP, comprising entirely of government bonds. For the East Asian countries, corporate bonds have amounted to nearly 9. 0 per cent of the GAP while for the selected COED countries the ratio is around 16 per cent. 17. Lack of Awareness and Confidence in Debt Products 18.
Dominance of Banking System 9. Poor Savings and Investment Rate 20. Financial Sector Vulnerability for Huge Non-performing Loans 21. Moderate Economic Growth Low Interest Rate Environment Prospects of a bond market in Bangladesh: Despite the earlier setbacks the bond markets in Bangladesh is ready to take off. The need for bond market in Bangladesh deserves attention because of the following: 1 . Foreign aid flow is diminishing and the trend is expected to continue. 2. Specialized banks are not in a position to supply desired level of long term fund. 3. Commercial banks have strategically cut down their long term lending. The concept of prudent asset mix is most likely to generate demand for investment grade bonds. 5. The Provident Funds and Insurance Companies Funds are not generally allowed to invest their funds in stock market instruments. There is a bright possibility that these funds maybe permitted to invest a part of their funds in marketable instruments subject to prudential guidelines, which may necessitate supply of lucrative debt instruments. 6. Reduction in the interest on Gobo. Savings instruments and withdrawal of certain savings instruments is expected to boost demand for debt instruments. 7.