Central bank to issue development bond
Thu, May 26, 2011 12:00 AM on Others, Treasury Bill,
KATHMANDU, May 26:
The central bank is issuing national development bonds worth Rs 5 billion.
“The Development Bond 2071 ‘ga’ will mature in three years in June 2014," according to the central that bank has determined the coupon rate of 9.5 per cent that will be paid semi-annually and subject to the interest tax.
Only 60 per cent of the development bond worth Rs 3 billion is been reserved for competitive applicants that will have to quote the price and the remaining 40 per cent worth Rs 2 billion will be sold to the non-competitive applicants.
The bidding process for bonds ensures the bulk selling, as institutional buyers like financial institutions and institutional savers purchase voluminous amount through bidding at their preferred quote.
"These bonds are tradable through Nepal Stock Exchange (Nepse)," the central bank said.
Currently, there are 224 million units of government bonds listed in the secondary market with the paid up capital worth Rs 22.4 billion. However, it has not seen any trading in the history of Nepse. "The bond's secondary trading is almost non existent despite being relatively risk free investment, and comfortable return," said market analyst Rabindra Bhattarai.
The ordinary investors are not too keen on purchasing bonds through stock exchange due to tax differences on institutional and individual investors -individual investors are charged higher tax.
However, the finance ministry today decided to address the issue soon to promote secondary market of bonds.
The bonds issued by the government are largely held up by the financial institutions to maintain Statutory Liquidity Ratio (SLR) as per Nepal Rastra Bank regulation. Moreover, public debt instruments are used by financial institutions to pledge as securities to the central bank to borrow funds as well.
Government securities are popular among institutional investors as well since these investment instruments are predominantly risk free with one per cent guarantee of substantial return yielding generous interest rates.
The budget deficit worth Rs 33.68 billion for the fiscal year 2010-11 is expected to be covered through public debt. However, according to the official at NRB's Public Debt Management Department, the central bank has so far issued the total of government securities worth Rs 10.75 billion that is one third of the projected issue.
The government's account so far has remained surplus as the rapid revenue collection compared to apprehensive government expenditure has removed the urgency of issuing all the designated amount of bonds. Of the total sanctioned expenditure worth Rs 150 billion in the first eight months of the current fiscal year, the government has been able to spend Rs 133 billion, while revenue mobilisation in the same period exceeded Rs 138 billion.
The central bank has planned to issue treasury bills worth Rs 10 billion, development bonds worth Rs 8 billion, citizen saving bond worth Rs 10.68 billion and foreign employment bond worth Rs 5 billion in the current fiscal year to cope with the fiscal deficit.
Source: THT
The central bank is issuing national development bonds worth Rs 5 billion.
“The Development Bond 2071 ‘ga’ will mature in three years in June 2014," according to the central that bank has determined the coupon rate of 9.5 per cent that will be paid semi-annually and subject to the interest tax.
Only 60 per cent of the development bond worth Rs 3 billion is been reserved for competitive applicants that will have to quote the price and the remaining 40 per cent worth Rs 2 billion will be sold to the non-competitive applicants.
The bidding process for bonds ensures the bulk selling, as institutional buyers like financial institutions and institutional savers purchase voluminous amount through bidding at their preferred quote.
"These bonds are tradable through Nepal Stock Exchange (Nepse)," the central bank said.
Currently, there are 224 million units of government bonds listed in the secondary market with the paid up capital worth Rs 22.4 billion. However, it has not seen any trading in the history of Nepse. "The bond's secondary trading is almost non existent despite being relatively risk free investment, and comfortable return," said market analyst Rabindra Bhattarai.
The ordinary investors are not too keen on purchasing bonds through stock exchange due to tax differences on institutional and individual investors -individual investors are charged higher tax.
However, the finance ministry today decided to address the issue soon to promote secondary market of bonds.
The bonds issued by the government are largely held up by the financial institutions to maintain Statutory Liquidity Ratio (SLR) as per Nepal Rastra Bank regulation. Moreover, public debt instruments are used by financial institutions to pledge as securities to the central bank to borrow funds as well.
Government securities are popular among institutional investors as well since these investment instruments are predominantly risk free with one per cent guarantee of substantial return yielding generous interest rates.
The budget deficit worth Rs 33.68 billion for the fiscal year 2010-11 is expected to be covered through public debt. However, according to the official at NRB's Public Debt Management Department, the central bank has so far issued the total of government securities worth Rs 10.75 billion that is one third of the projected issue.
The government's account so far has remained surplus as the rapid revenue collection compared to apprehensive government expenditure has removed the urgency of issuing all the designated amount of bonds. Of the total sanctioned expenditure worth Rs 150 billion in the first eight months of the current fiscal year, the government has been able to spend Rs 133 billion, while revenue mobilisation in the same period exceeded Rs 138 billion.
The central bank has planned to issue treasury bills worth Rs 10 billion, development bonds worth Rs 8 billion, citizen saving bond worth Rs 10.68 billion and foreign employment bond worth Rs 5 billion in the current fiscal year to cope with the fiscal deficit.
Source: THT
