...Bond Market INTRODUCTION Presently, as there is a robust growth of industrial activity in our economy, the need for investment has grown significantly and has resulted in a strong credit growth Some disintermediation is expected to take place as the most creditworthy borrower seeks the lowest borrowing costs. This development has re-emphasized the fact that bond financing has to supplement the traditional bank financing to take care of the growing credit needs of the economy. The Indian debt market, particularly the government securities market, has undergone a significant transformation since the introduction of reforms in the financial markets in 1991-92. The primary objective behind the reforms has been to moderate liquidity growth, contain inflationary pressure, and conduct public debt management in a cost-effective manner. Various reforms have also been undertaken in the corporate debt market. The corporate bond market is an important segment of the financial market in terms of funds raised well as potential for future growth. The Securities and Exchange Board of India (SEBI) was established in 1992, to regulate the primary issue in equity and de markets and to ensure sound trading practices in the secondary market throu stock exchanges. The bond market is an important source of funding for both t government and corporate sector. The bond market, also known as the debt, credit, or fixed income market, is a market where participants buy and sell debt securities...
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...Bond Markets A bond is a debt security, or basically a loan, that an investor makes to a corporation, a government, an agency, or municipalities. In return for up-front cash, a corporation or government promises to make specific payments to a bondholder on specific dates. The bondholder can not only expect fixed payments but also the principle repayment when the bond reaches its maturity date (The Bond Market, 2002). A bond is considered a fixed-income security because the investor knows the exact amount of cash that will be paid back if the bond is held until maturity. A bond market is a financial marketplace where investors can purchase and sell various types of bonds or debt securities. It can be categorized into three main groups: issuers, underwriters, and purchasers. Issuers sell bonds or other debt securities in the bond market to finance the operations of their various organizations. The main issuers of the market are governments, banks, and corporations. Underwriters are traditionally made up of investment banks and other financial institutions that help the issuer to sell the bonds in the market. The need for underwriters is the greatest for corporation debt market because there are more risks involved. Purchasers are made up of those who buy the debt being issued in the market. They can include not only every group mentioned but also any other type of investor, including the individual. The largest player in the market is governments because they borrow and lend...
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...Bond market is a financial market where bond market participants can issue new debt securities, known as the primary market, or buy and sell the bonds among investors, known as the secondary market. The Securities Industry and Financial Market Associations (SIFMA) classifies the bond market into following types : Types of bond markets * Government and Agency Government-sponsored enterprises (GSEs) issues the government and agency securities to fund their daily operations. These government bonds generally promising to pay a certain amount (face value ) on a certain date. The offering of these bonds are usually backed by the government but not all guaranteed by the government since some agencies are private entities. * Corporate It is a bond that a corporation issues to raise money in order to fund and expand their business. These bonds are usually long term debt instrument with a maturity date falling at least a year after the issued date. These corporation range from industrial field, financial companies to service-related corporations. * Municipal Municipal debt securities are usually issued by municipal council in a state and other government entities to raise fund to build/maintain local infrastructure such as recreational park, highways, hospitals, schools and so on. Municipal bond are considered as separately from other types of bonds is their tax-exempted ability which provide tax exempt income. * Mortgage backed securities and Asset-backed...
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...investment, economic prospects, social dimensions even poverty are affected by financial market. The available vast empirical and analytical literature suggest that in addition to other economic factors, the performance of long term economic growth and welfare of a country are related to its degree of financial sector development. Developed countries’ experience suggests that strong government bond market creates favorable environment for the development of an efficient corporate bond market although it is not always essential for a country to develop a government securities market. The financial markets, pivotal point of financial sector, execute a crucial role within the global economic system such as attracting and allocating savings, setting interest rate and discovering the prices of financial assets (Rose, 2003). A well diversified financial sector is highly dependent on the extreme collaboration of financing from equity market, bond market, and banks. The government bond market forms the backbone of a modern securities market in both developed and developing countries. Bangladesh has not been blessed with the contribution of both Corporate and Government bonds and consequently experiences the poor economic growth. With the current financial structure, characterizing the dominating presence of commercial banks, particularly the State Owned Commercial Banks (SCBs), the debt market of Bangladesh is very small relative to other South Asian countries amounting only 5.5 percent...
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...Overall Bond Market Outlook: The bond market generated a strong performance in 2011, with long-term U.S. Treasury bonds realizing double-digit returns. In general, higher-quality bonds outperformed riskier bonds as investors sought safe harbor in volatile markets. During the second half of 2011, both investment-grade and high-yield bonds have experienced rising yields, and underperformance relative to U.S. Treasuries, due to economic volatility in Europe. At the same time, however, the underlying fundamentals of U.S. companies continue to improve: earnings are strong, balance sheets are robust, and many companies are continuing to find room to reduce costs. As a result, there exists room for improvement in both asset classes this year should the economic climate in Europe improve. This year, bond market returns likely will remain stable since interest rates are at near historic low levels. Thus, I expect interest rates to remain relatively near historic lows. Further, I expect the Federal Reserve to keep short-term interest rates near zero in 2012. A recent consumer price index report indicated that overall inflation had decreased to 3.0% while the core inflation rate had slipped to 2%. The Fed’s “Operation Twist”, aimed at holding down long-term rates, is not expected to be completed until the middle of next year. Last year, the total return for the Barclays Aggregate Bond Index was 7.8%, led by strong gains in U.S. Treasuries. Last year’s common theme was the outperformance...
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...Financial market is composed of different markets- Money Market, Capital Market, Derivative Market etc. All the markets play an interactive role for the development of economy by formation of capital through mobilizing funds, industrialization of economy through supplying adequate funds, providing services, linking investors to the industrial entrepreneurs etc. Besides, this requires sound regulatory framework, sound and investment sensitive administrative infrastructure, fiscal supports for making their role effective for economic development. Bond market in Bangladesh: The financial sector of Bangladesh is characterized by the dominating presence of commercial banks, especially the Nationalized Commercial Banks (NCBs). Although, a paradigm shift in the degree of dominance has been observed of late with the emergence of private commercial banks-traditional and shariah based banking. Banking sector accounted for about 75 percent of the total financial system. Most of the available funds go to the NCBs in the form of deposits and channeled into lending. However, the NCBs had substantial nonperforming loan (NPL) portfolios. Both insurance and mutual funds industries are very small. The debt market being an integral part of financial market plays a complementary role in developing economy through allocation of funds to the different deficit sectors. The debt market consists of money market, mortgage market, bond market and derivative market. The debt market of Bangladesh...
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...Government Bond Market: A liquidity mechanism or crowding-out effect? It is the country that leads the infamous BRICs, coined by Jim O’Neill, Brazil. The 5th largest country in the world now also boasts an almost corresponding, 6th largest economy in the world, recently overtaking the once economic powerhouse, the UK. As far as Latin America is concerned, Brazil is the flesh and blood proof that success stories can come out of a perpetually hopeless case that is Latin America. As recently as November 2011 Standard & Poor’s upgraded sovereign dollar-denominated foreign debts to BBB from BBB- and government’s local currency debt from BBB+ to A- . Renewed hope in the last decade and a half in Brazil’s strong macroeconomic fundamentals and a commitment by it’s three previous and current governments has signaled with enough longevity to the market that Brazil is a good place to investment. With foreign financial managers constantly in the hunt for higher returns, Brazil is a paradise for high returns with relatively lower risk as far as emerging market countries are concerned. The confidence in the market for Brazilian securities has allowed the government to galvanize this huge source of funding for their gargantuan financing needs. With a stable level of over $350 billion in foreign currency reserves, a weakening yet stable economy and strong leadership on the monetary and fiscal side of politics, the Brazilian government has been able to issue huge amounts of bonds and even...
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...____________ABC_______________ Student Name: ____________ABC_____________ Student Signature: ____________Anh__________________________ Date of Submission: ____________March 14th, 2010________________ Name of first marker: Mark: Name of second marker: Mark: DISSERTATION PROPOSAL ON VIETNAMESE CORPORATE BOND MARKET: THE CAUSES OF UNDERDEVELOPMENT BY ABCDEF ABCDEF ID: 123456789 14th March, 2010 Table of contents 1. Background of study 4 1. Structure of literature review 6 2. Significance of study 6 3. Research questions and objectives 7 1. Research questions 7 2. Research objectives 7 4. Research methodology 8 1. Research design 9 2. Data collection 9 3. Ethical permission 9 5. Time scale 9 1.6.0 Resources 10 References 11 Appendix 1 12 1. Background The corporate bond market is an important link between savings and investments with the publicly traded debt instruments issued by...
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...What fundamentals affect the yield of bonds (Singapore market) By: G8 Lee Kang Wee Olivia Tan Daryle-‐alexis Tan Ho Guoming FIIM FNCE 102 Professor Huang Sheng Introduction As an international financial centre with about 11% of GDP from financial services, we felt it would be interesting to find out more about the Singapore money market. Since the start of the new millennium, Singapore’s bond market has taken off and has now one of the most developed bond markets in Asia with about SGD357 billion in 2011 and this number is expected to grow further with more and more money flying into Asia from the West due to various economic situations. One area of high growth is in the Islamic debt area. For the purpose of ...
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...Crusoe: a representative household has preference for consumption today and tomorrow, goods are non-storable – those not used today will spoil. Nature endow household such that will receive y1 coconuts today and (is expected to yield) y2 coconuts tomorrow. Mathematically: * Choose (c1, c2) to maximize u(c1, c2) subject to: c1 ≤ y1 and c2 ≤ y2. Choose cD1 = y1 and cD2 = y2. Therefore consume entire income in one period, this is assuming it is a closed economy, therefore must live by period-to-period basis, consumption can’t exceed income at any point. * An International Bond Market: introduce international financial market - one type of financial instrument—a risk-free private debt instrument: bond In the model, only two goods: current consumption and future consumption, exchanged in one market (a market in which households exchange current consumption for future consumption—i.e., a financial market). The relevant price in...
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...Recently, finance headlines have all been about the US government shutdown and debt ceiling. Last Oct. 1, the US experienced its 1st government shutdown in 17 years. Since the shutdown of Oct. 1, the US stock market had been down almost every day while global stock markets experienced a roller coaster ride. This changed last Thursday when a glimmer of hope started to surface. Over the weekend, American politicians engaged in marathon discussions to solve the US government shutdown and the US debt ceiling problem. Despite the gravity of the situation in the US, some of our readers and investors are still not familiar with it. They have been asking us how this will affect our economy and stock market. Philequity Corner was conceived with a mission of educating the investing public. As part of our educational mandate, we shall discuss in this article the problems that the US is experiencing. Moreover, we shall explain how these might affect the global economy, global stocks and in particular, the local stock market. What is the US government shutdown? A government shutdown takes place when the US Congress fails to allot funds for the incoming fiscal year. This last happened in October 1995 and this current shutdown started in Oct. 1. To date, the US government has been shut down for almost two weeks already. The shutdown closed certain parts of the US government that are deemed non-essential. Some examples of these are national parks and monuments, certain services for veterans...
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...The lesson that was learned (or re-learned) in the commercial real estate (CRE) crash of the early 1990s was that problems associated with massive over-supply can plague the industry for many years. The lesson that will be learned in the current crash (with CRE prices declining by 40-50%, or more, from their peaks, the term crash is, once again, appropriate) is that problems emanating from the financing side—in particular, a massive deterioration in underwriting standards and a concurrent rise of excessive leverage—can lead to problems of a similar (or greater) magnitude, even without supply problems. While most attention in commercial real estate today is focused on the dramatic deterioration in term loan performance (i.e. the performance of loans prior to maturity), we believe that a potentially even more troublesome issue is the extent to which loans originated during the 2005-2007 period will encounter problems refinancing at maturity. To date, this issue has largely been dismissed with the vague and, in our view, naive observation that lenders will simply extend the maturity dates of loans that fail to qualify for refinancing. However, the scale of this problem is virtually unprecedented in commercial real estate, and its impact is likely to dominate the industry for the better part a decade. At its core, the issue is fairly straightforward: The dramatic weakening in underwriting quality that began in 2005, along with compressing cap rates and ballooning leverage...
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...most competitive markets by tailoring unique transactions and creating ingenious know how in collection, P1 invests in NPL portfolios and makes two digit IRR in cash. Corporate Debt Servicer Pragma Inkaso • Pragma Inkaso SA. Group has existed since 2002 and it focuses on the actions in the field of company debt collection and business financing. • With over 5 thousand clients it has been the leader of the corporate debt market for several years now. • In 2013, the composition of the Group was enhanced with a securitization fund – Pragma 1 FIZ NFS and a business unit responsible for the buyout of debt from bulk suppliers and banks. • Pragma Inkaso is quoted on the Warsaw Stock Exchange. Corporate Debt Servicer The Company Corporate Debt Servicer Pragma Inkaso Soft Collection / Deal Makers – 15 people and growing Hard Collection – 17 people External Field Collection – 40 people Litigation – 20 lawyers (8 advocates, 12 sollicitors) NPL origination and management – 6 managers and analysists Corporate Debt Servicer Pragma Inkaso is an NPL expert, which - thanks to the thorough knowledge on the market - moves on its most difficult area – small & medium enterprise debt and corporate debt. Corporate Debt Servicer Debt market in Poland Sold retail debt 2013 2014 2015 PLN 11.2 billion PLN 14 billion (25% increase) PLN 20 billion (43% increase) The value of the Polish NPL market (retail and corporate)...
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...CMBS Markets – A Summary of Issues, Causes, and Future Markets With today’s economic difficulties it is no surprise that the markets for MBS and CMBS are down. The financial market crisis has definitely hit our economy and the MBS and CMBS markets are no exception. The credit meltdown has led to a curious pricing disparity in the commercial MBS market: Triple-A paper with a 5-year term is suddenly trading at spreads way above similarly rated 10-year bonds, due primarily to rising concerns about "extension risk." Last Friday, 10-year super-senior CMBS was trading at 1,050 bp over swaps, while the spread on 5-year notes swelled to 1,300 bp. Over the summer, before the credit markets went into a deep tailspin, the difference between the 5- and 10-year spreads generally was only a few basis points. The pricing difference throws bond-market convention on its head. All things being equal, long-term paper normally commands higher spreads to reflect the greater risk associated with holding investments longer. That started to change in the summer of 2007, when the credit crunch caused bond trading to slow. The benchmark classes of 10-year bonds started trading at slightly tighter spreads than 5-year paper because their larger supply offered more liquidity. But more recently, the gap has ballooned, widening to as much as 400 bp. "The trend has really become noticeable over the past month," one investor said. The new concern about 5-year CMBS is that the timely payoff of bonds depends...
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...The bond market is a less known in the financial world than the share market, but it doesn’t mean that it is not as important as the share one in terms of volumes. The main reason may be that the Governments are a big part of this market. Because unlike a share, a bond is a debt contract not a proportion of capital. Usually, the international bond market is divided in three entities: the domestic bonds, the foreign bonds and the Eurobonds. The Eurobonds segment of the international market is, according to David. L. Scott and almost all dictionaries “a type of foreign bond issued and traded in countries other than the one in which the bond is denominated.” This paper is going to focused on this particular bond issued by a particular issuer: The Eurobonds issued by Government. Why do governments issue such an instrument and why investors are more willing to buy it? It would remind, first the history of Eurobonds and why do the Governments are issuing those bonds , and then try to understand why do investors are interested in this type of bond, to reach the idea that there may have some boundaries to it. I The best way to introduce the subject might be by retracing it History in a Governmental point of view: After a slow start, the Eurobond market has grown to become a major force in the international securities markets, in part due to their tax-free status and ease of trading. Eurobonds is a market for big issuers; large institutional clients, big life insurance, and Governments ...
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