Central Bank to Issue Citizen Bond

Nepal Rastra Bank (NRB) is issuing Citizen Bond worth Rs 5 billion. The ‘Citizen Bond 2070 ka’ — that as a maturity period of in three years — offers 9.5 per cent interest.
The Public Debt Management Department of the NRB is floating ‘Citizen Bond 2070 ka’ from May 12 to June 1. “The interest rate will be paid every six months until the maturity period,” said the central bank.

“The bond will be listed at the Nepal Stock Exchange (Nepse) and can be used as a collateral against loan.” Though the secondary market has listed 16 government bonds and 13 corporate bonds, the Nepse has not witnessed any trading of bonds so far. The government bonds started to be listed at the secondary mar

ket in November 2005.
According to the Nepse, it has listed a total of 224 million units of government bonds worth Rs 22.4 billion. Among the listed fifteen development bonds four will mature within this year.

Similarly, Nepse has also listed corporate debenture of commercial banks. A corporate debenture is also a bond issued by a company to raise money in order to expand its business.

Nepse has listed 4.975 million units of corporate debenture worth Rs 1000 per unit amounting to Rs 4.975 billion.

NEA has listed the highest number of bond — 1500 unit — worth Rs 1.5 billion. Nepse has also alloted the time of trading for the bonds. “Every morning — from Sunday to Friday — the bonds could be traded from 10.30 to 11.30,” according to the Nepse.

All the listed bonds make up about 25 per cent of the total listed securities in the secondary market. The government bonds covers around 20 per cent of the total paid up value of the securities listed in the Nepse. Similarly, corporate bonds cover the 4.43 per cent of total paid up value of the listed securities. A bond is a debt security, in which the authorised issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals.

Despite being the safest investment instrument, the domestic secondary market has not seen trading of government bonds. “Stocks, bonds and mutual funds are the most popular asset classes but in domestic secondary market the stocks are more popular due to high and quick return,” said Rabindra Bhattaria, a renowned market analyst.
“Bonds and stocks are both securities but the major difference between the two is that stockholders have an equity stake in the company means stock holders are owners, whereas bondholders are only lenders,” he said adding that another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely. The ignorance of the general public about bonds and lust of high return in short time from stocks made investors trade only stocks. “High return means a high risk also,” Bhattarai said adding that the bonds is the safest instrument.