Importance Of Bond Market Development In Pakistan

Essay text:

It is a market falling in between equity market and bank finance. So it suits to that class of investors/borrowers who either are not considered high risk taking investors/borrowers or act under relatively safe parameters within bank finance. Development of zero coupon instruments and later innovations have paved the way for development of a market which is quite complex as compared to bank and equity finance markets, however it provides new heights to the investors as well as issuers to match their requirements. 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 also reduces 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 liquid domestic saving vehicles ? Creates monetary policy instruments ? Provides most stable type of borrowing that a country or corporation can engage in...