Challenges & Constraints Faced by Bond Market in Pakistan

Abstract

The focus of the study will be to examine the prevailing situation of the bond market in Pakistan and to study the factors that influence the bond market. A well-developed bond market proves that the financial sector is sound and stable and hence an attractive investment opportunity. The bond market of Pakistan is in an underdeveloped state, which is triggered by a number of factors. These factors have been looked upon in the paper. Amongst the major ones are: open market operations, investor base and primary and secondary markets. Other key factors include, unstable yield curves, lack of technological infrastructure, unstable monetary schedule and unfair competition by government securities such as NSS. We have concluded from our research that the bond market in the country is not fully functional and that the state bank of Pakistan along with the government will have to take steps to develop the fixed income securities market. The paper also serves as a guideline as to the actors of the bond market, that is the authorities and the market participants and also sheds light on what factors need to be taken into consideration to foster the growth of the bond market. The recommendations at the end of the paper focus on the solution to this dilemma.