sohaib sultan bond

Introduction of Bond An important function of management is providing f unds required t o operate the business. Different alternatives are available to meet the temporary and permanent cash and working capital needs of business. If funds are nee ded for long-term purpose such as the construction of a new factory building, the borrowing may take the form of long-term loans, debentures, bonds or term finance certificates, this will take a long time for the increased earnings form the new plant facilitates to be used in retiring the debts. Background Bonds play an important role in mobilization of capital. The investments are very necessary for economic development of a country. A good market will help promote economic growth and reduce the risk of financial crises. To improve the efficiency of the bond what can be done is that financial market regulation and supervision should be strengthened, market infrastructure should be enhanced, new investments areas (products) for better mobilization of savings and improvement of investor bases. Significance of Bond for Pakistan Bond is of great significance to a country that faces large budget deficits, like Pakistan. Generally a well developed bond is important for these reasons: Increasing the competitiveness and efficiency of the financial system, which here is dominated by large banks. At micro economic level development of securities market. (Bond market development in Pakistan by Muhammad Arif 2007 Current status and Overview In 1991, the government with the consultation of World Bank, started issuan ce of two types of securities³ one of short-term maturity and the other of long-term maturity on the basis of auction through the intermediation of primary dealers, i.e. treasury Bills (short-term) and federal investment bonds (long-term). The salient features of the treasury bills are as under: T-Bills The bills are issued at a discount. The inves tors are required to quote the price at which they are willin g to buy t-bills of Rs.100 face value. Individuals, institutions and corporate bodies including banks/DFIs are eligible to purchase the bills. The principal and profit accrued thereon is guaranteed by the government. Principal and profit is payable co maturity. T-bills can be traded freely and are transferable by endorsement and delivery. Tax is deducted at source under the Income Tax Ordinance 1979. Federal Investment Bonds Bonds are of three different maturity periods viz. three years, five years and ten years. Short-term FIBs have also been issued. Individuals, institutions and corporate bodies including banks, irrespective of their residentia l status can purchase bonds . There is no quantitative limit on purchases. Bonds are redeemable at par on completion of their respective maturity period. In case cash is require before the maturity date of the bond, the investor may approach his banker these bonds converted into cash at the market price. In the manner, the government bonds can be traded freely in the secondary market before their maturity date. Each bank is required to display daily sale and purchase prices of bonds at their main branches in major cities.

sohaib sultan bond

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