Govt bond witnesses encouraging subscription

KATHMANDU, Jan 1: 

After a long time, the latest bunch of government securities targeting the general public witnessed encouraging subscription.

“The public subscribed for securities worth Rs 700 million of National Saving Bond 2075 that had offered securities worth Rs 800 million,” informed a high official at Nepal Rastra Bank’s Public Debt Management Department. This is the highest rate of subscription for bonds meant for the public in recent history. 

Of the total bond worth Rs one billion, bonds worth Rs 800 million were meant for the general public, while other institutions can apply for the remaining amount worth Rs 200 million. Issue was

open from December 10 to 24 for the public. 

“The coupon rate offered in the current bond is quite high at eight per cent in the present context that might have attracted investments from the public,” said the official. 

Despite being a relatively risk-free investment instrument, securities targeted towards the public have a difficult time being subscribed. 

In fiscal year 2011-12, Citizen Saving Bond 2074 worth Rs 1.41 billion got applications for bonds worth only Rs 126.5 million, although the coupon rate offered was 9.5 per cent. In addition, in the same year, the National Saving Bond Offering worth Rs 1.68 billion meant for the public also reported negligible subscription. 

“NRB did not offer any public oriented securities last fiscal year, due to which people were attracted to the current issue,” pointed out the official. Fixed deposits are offering up to seven per cent interest rate of one year term. These bonds are supposed to be the investment instrument for the public — an alternate to fixed deposits at banks. Like bank deposits, such gilt-edged securities are considered a secure investment that provides fixed returns. 

Unfortunately, retail investors are not attracted to government securities so they hardly get fully subscribed — the remaining has to be absorbed either by institutional investors or by the central bank itself. 

Moreover, in the last two fiscal years, only about one-fifth of the total issue of public oriented bonds were subscribed. Between fiscal years 2011-12 and 2012-13, NRB has issued National Saving Bond, Citizens Saving Bonds and Foreign Employment Bonds worth Rs 3.68 billion of which bonds worth Rs 1.78 billion got subscribed.

Foreign Employment Bonds targeted at Nepali migrant workers and returnees have also failed to see large participation from the targeted customers despite offering hefty interest. Currently, the Foreign Employment Bond 2075-KA issue worth Rs 250 million is open till the first week of January.

Source: THT