Driven by market forces rather than state intervention, debentures have suddenly leaped from a peripheral asset class to a dominant market force.
The Historical Rise of Bonds: A Data Breakdown
Data from NEPSE reveals that while bond turnover has steadily climbed over the last three fiscal years, it has exploded exponentially in recent months.
Annual Turnover Growth
- FY 2023/24 (2080/81): Rs 1.73 billion
- FY 2024/25 (2081/82): Rs 2.76 billion (An increase of 59.56%)
- FY 2025/26 (2082/83): Rs 8.06 billion (An increase of 191.88%)
The 8,000% Monthly Jump
- Mid-April to Mid-May 2026: Total bond transactions were limited to a modest Rs 57.3 million.
- Mid-May to Mid-June 2026: Transactions skyrocketed to Rs 4.69 billion—a historic monthly surge of 8,087.32%.
June Dominance
On a recent record-breaking trading day, out of NEPSE’s total turnover of Rs 3.32 billion, non-convertible debentures alone accounted for Rs 2.78 billion. This means a staggering 83.64% of the entire market’s daily transactions came from bonds.
Why the Sudden Institutional Interest in Bonds?
According to NEPSE Spokesperson Murahari Parajuli, a stagnant stock market coupled with declining interest rates has driven institutional investors toward safer, guaranteed-return assets.
"Whenever the regular equity market is stable or offers minimal chances of capital gains, institutional investors gravitate toward products with guaranteed returns. Because stock performance is sluggish and commercial banks have lowered fixed deposit rates to historic lows, the 7% to 10% coupon rates offered by older debentures have become highly attractive to institutional fund managers."
— Murahari Parajuli, NEPSE Spokesperson
The Inside Secret: Pre-Open Sessions & The YTM 'Game'
Madan Poudel, CEO of NASA Securities (Nepal’s largest brokerage firm), reveals how corporate giants are executing these massive trades behind the scenes through two primary strategies:
- Exploiting the Pre-Open Session (10:30 AM – 10:45 AM)
During regular market hours (11:00 AM to 3:00 PM), the Market Depth tool is fully public. If two corporations agree to trade a massive volume of debentures for portfolio management, an outside individual investor could intercept and "snatch" the order. To ensure secure, uninterrupted corporate-to-corporate transactions, institutional players execute these large-block trades safely during the 15-minute pre-open window.
- The Mathematics of Yield to Maturity (YTM)
Many older listed debentures carry high coupon rates (8% to 10%) but are currently trading at a discount below their Rs 1,000 face value.
Purchasing discounted bonds allows institutional funds to secure an additional spread of 4% to 5% per annum compared to keeping cash in standard bank deposits yielding only around 5%.
Government Policy: A Decade of Empty Promises
The most remarkable aspect of this boom is that it has occurred entirely via automated market demand, with zero help from state regulators.
For the past ten years, the Government of Nepal, Nepal Rastra Bank, and the Securities Board of Nepal (SEBON) have repeated slogans about "expanding and developing the bond market" in their annual budgets and policy frameworks. In reality, actionable reforms—such as secondary market liquidity mechanisms, attractive tax exemptions, and incentives for individual retail investors—remain virtually non-existent. The market has simply matured on its own to solve its own liquidity problems.
The Path Ahead
While a sluggish equity market and low bank interest rates have pushed the bond market to historic heights, this growth must be standardized.
To ensure sustainable and transparent growth, regulators (NRB, SEBON, and NEPSE) can no longer remain passive. There is an urgent need to establish a dedicated, transparent system for large block trades so corporate entities are no longer forced to resort to pre-open sessions to secure their transactions. It is time for the government to move past paper promises and actively build a robust framework for Nepal's corporate debt market.
