Bond market analysis of Bangladesh

Abstract

The capital market has always been a few steps behind in development compared to GDP growth of our nation. One would expect that the capital market - stocks, bonds and options would start flourishing as the economy grows. However, that has not been the case for the Bangladesh capital market more so the bond market. The paper provides a comparison between the bond market of Bangladesh with the neighbouring countries such as India, Pakistan and Srilanka. This paper dives into the bond market of Bangladesh and perfects to analyse the limited number of bonds available in the market. It aims to figure out any correlation with the Dhaka Stock Exchange by analysing the correlation coefficient between the prices of bonds and the index numbers. This helps to understand whether the stocks at DSE are affecting the bond prices or not. The paper also talks about the reasons for the failure of bond market in Bangladesh through a thorough of the bonds performance and investors sentiments. Several reasons such as lack of understanding of the bond market, too much reliance on bank savings account and poor accountability and corporate governance has eroded people’s trust in capital markets. Suggestions have also been provided based on the specific problems in the bond market such as improving financial literacy, encouraging and promoting investments in bonds. If implemented accordingly, the Bangladesh bond market is likely to flourish in the upcoming years.