South Asian Bond Markets: Developing Long-Term Finance for Growth

Contents......Page 6
Foreword......Page 12
About the Authors......Page 14
Acknowledgments......Page 16
Acronyms and Abbreviations......Page 18
Executive Summary......Page 22
The Importance of Bond Markets......Page 28
Profile of Regional Financial Markets......Page 31
Constraints in Domestic Debt Securities Markets......Page 37
A Varied Agenda......Page 50
References......Page 51
Introduction......Page 54
Supply Side: Debt Instruments and Issuers......Page 56
Table 2.9 Holdings of Treasury Bills and Bonds by Investor Category, Bangladesh, 2002–06......Page 69
Market Infrastructure......Page 71
Legal and Regulatory Framework......Page 74
Recommended Actions......Page 77
Annex 2.1 Reforms in the Banking Sector......Page 81
References......Page 82
Introduction......Page 84
Supply Side......Page 90
Figure 3.2 Yield-to-Maturity Curve in Government Bond Market, India, November 13 and 14, 2007......Page 93
Market Infrastructure......Page 95
Changes in the Legal Framework......Page 101
Corporate Bond Market......Page 102
Supply Side......Page 103
Table 3.10 Outstanding Issues of Corporate Bonds, India, August 25, 2005......Page 106
Table 3.11 Disparities in Treatment of Bonds and Loans in Bank Regulations, India......Page 108
Legal and Regulatory Framework......Page 114
Recommended Actions......Page 117
Annex 3.1 Reforms in the Banking Sector......Page 123
Annex 3.2 Reforms in the Government Debt Securities Market......Page 125
Annex 3.3 Maturity Profile of Central Government Debt Securities......Page 128
Annex 3.4 Regulatory and Market Reforms for the Corporate Bond Market Recommended by the Patil Committee......Page 130
References......Page 132
Introduction......Page 134
Table 4.2 Financial Market Profile, Nepal, 2002–07......Page 136
Table 4.7 Cost of Bond Issuance, Nepal, 2007......Page 142
Market Infrastructure......Page 145
Legal and Regulatory Framework......Page 147
Recommended Actions......Page 149
References......Page 150
Introduction......Page 152
Supply Side: Debt Instruments and Issuers......Page 154
Demand Side: The Investor Base......Page 166
Market Infrastructure......Page 168
Legal and Regulatory Framework......Page 170
Recommended Actions......Page 172
Annex 5.1 Banking Sector Reforms......Page 174
Table A5.1 Government Debt, Pakistan, Fiscal 2002–07......Page 176
Annex 5.3 Capital Market and Regulatory Reforms Taken or Proposed by the Securities and Exchange Commission of Pakistan......Page 178
References......Page 180
Introduction......Page 182
Box 6.1 Chronology of Bond Market Development in Sri Lanka......Page 184
Demand Side: The Investor Base......Page 193
Table 6.10 Performance of Mutual Fund Industry, Sri Lanka, 2002–06......Page 196
Legal and Regulatory Framework......Page 201
Recommended Actions......Page 203
Annex 6.1 Recent or Proposed Measures by the Central Bank to Strengthen the Financial System......Page 208
References......Page 210
Box 1.1 How Malaysia Enhanced Liquidity in Its Domestic Bond Market......Page 46
Box 2.1 Islamic Bonds Offering a New Alternative for Issuers and Investors......Page 64
Table 2.10 Securitization Transactions, Bangladesh, 2004–07......Page 73
Box 3.1 A New Instrument for India’s Money Market......Page 100
Box 4.1 Chronology of Bond Market Development in Nepal......Page 137
Figure 2.1 Trends in Selected Interest Rates, Bangladesh, March 2006–December 2007......Page 60
Figure 2.2 Weighted Average Yield of Treasury Bills Based on Auction of December 30, 2007, Bangladesh......Page 65
Table 2.7 Cost of Bond Issuance, Bangladesh, 2007......Page 67
Table 3.4 Consolidated Liabilities of Central and State Governments, India, Selected Fiscal Years, 1991–2007......Page 89
Figure 3.3 Securitization Transactions, India, Fiscal 2003–07......Page 111
Figure 4.1 Distribution of Holdings of Government Bonds and Treasury Bills, Nepal, 2002–06......Page 143
Table 5.6 Results of Pakistan Investment Bond Auctions, Fiscal 2001–07......Page 158
Figure 5.2 Structure of Domestic Government Debt, Pakistan, Fiscal 2002–06......Page 161
Figure A5.1 Government Debt, Pakistan, Selected Fiscal Years, 2002–07......Page 177
Figure 6.1 Maturity Structure of Treasury Bonds and Rupee Loans, Sri Lanka......Page 188
Figure 6.2 Yield-to-Maturity Curves for Government Debt Securities, Sri Lanka, Selected Dates, December 2005–June 2007......Page 189
Table 1.1 GDP Growth, Selected South Asian and East Asian Economies, 2002–07......Page 32
Table 1.2 Selected Macroeconomic Indicators, Selected South Asian Countries, 2002–06......Page 33
Table 1.3 Financial Market Profile, Selected Economies, 2006......Page 34
Table 1.5 Domestic Debt Securities Markets as a Percentage of GDP, Selected South Asian Countries, 2002–06......Page 36
Table 1.6 Cost of Bond Issuance, Selected South Asian Countries, 2007......Page 42
Table 2.1 Structure of Financial System, Bangladesh, 2004–06......Page 55
Table 2.2 Selected Interest Rates, Bangladesh, September 2005–June 2007......Page 59
Table 2.3 Composition of Domestic Government Debt, Bangladesh, Fiscal 2000–07......Page 61
Table 2.4 Results of Treasury Bill Auctions, Bangladesh, Week Ending December 30, 2007......Page 62
Table 2.6 Interest Rate on Savings Products by Source and Maturity, Bangladesh, June 2007......Page 63
Table 2.8 Government-Sponsored Infrastructure Investment Projects in the Pipeline, Bangladesh......Page 68
Table 2.11 Regulators of the Capital Market and Market Participants, Bangladesh......Page 75
Table 3.1 Financial Market Profile, India, 2002–September 2007......Page 85
Table 3.2 Net Institutional Investments in Equity and Debt Securities, India, Fiscal 2002–07......Page 87
Table 3.3 Composition of Domestic Debt Securities Market, India, 2002–06......Page 88
Table 3.5 Participants and Products in Debt Securities Market, India......Page 91
Table 3.6 Resource Mobilization by Mutual Funds, India, Fiscal 2006–07......Page 94
Table 3.7 Liquidity in Government Debt Securities Market, India, Fiscal 2003–08......Page 98
Table 3.8 Costs of Bond Issuance through Private Placement, India, 2006......Page 104
Table 3.9 Resources Mobilized through Public and Private Placement, India, Fiscal 2005–07......Page 105
Table A3.1 Profile of Central Government Market Loans, India, Fiscal 1998–2008......Page 129
Table 4.1 Financial Institutions by Type, Nepal, Selected Years, 1990–2007......Page 135
Table 4.4 Interbank Transactions, Nepal, Fiscal 2005–06......Page 138
Table 4.5 Composition of Domestic Government Debt, Nepal, Fiscal 2002–07......Page 139
Table 4.6 Corporate Debenture Issues, Nepal, Fiscal 1997–2007......Page 141
Table 4.9 Investment Portfolio of Employees’ Provident Fund, Nepal, 2002–07......Page 144
Table 5.1 Financial Market Profile, Pakistan, 2002–06......Page 153
Table 5.2 Composition of Debt Securities Market, Pakistan, 2006......Page 155
Table 5.4 Net Outflow through Treasury Bill Auctions and Open Market Operations, Pakistan, Fiscal 2007......Page 156
Table 5.5 Results of Treasury Bill Auctions, Pakistan, Fiscal 2002–07......Page 157
Table 5.8 Composition of Domestic Government Debt, Pakistan, Fiscal 2002–06......Page 160
Table 5.9 New Equity and Corporate Debt Issuance, Pakistan, Fiscal 2000–06......Page 163
Table 5.11 Cost of Bond Issuance, Pakistan, 2007......Page 165
Table 6.1 Structure of Financial System, Sri Lanka, 2005–06......Page 183
Table 6.2 Features of Government Debt Instruments, Sri Lanka......Page 186
Table 6.3 Composition of Domestic Government Debt, Sri Lanka, 2000–06......Page 187
Table 6.4 Targets Identified by Sri Lanka’s Medium-Term Strategy for Debt Management......Page 190
Table 6.5 Corporate Debt Securities Listed on the Colombo Stock Exchange, 2002–06......Page 191
Table 6.7 Cost of Bond Issuance, Sri Lanka, 2007......Page 192
Table 6.9 Composition of Employees’ Provident Fund Investment Portfolio, Sri Lanka, December 2005......Page 194
Table 6.11 Secondary Market Trading of Treasury Bills and Bonds, Sri Lanka, 2001–October 2007......Page 199