FIM301 IA

Topics: Bond, Bond market, Bonds Pages: 26 (2461 words) Published: November 12, 2014


Individual Assignment

VALUATION & FINANCIAL MODELLING

Hà Hải Định (SB00961)

Contents
Executive Summary3
Part 1: Overview of the Japanese Government Bond Market3
Process of issuance of Government Bonds4
How Government Bonds are traded in the market4
Some statistic data about the Government Bond market during the past 5-10 years5 Part 2: Compare with the Vietnamese Government Bond market1 -The differences between the two markets1
-Advantages and Disadvantages of Vietnamese Gov Bond market3 -Prospect of Vietnamese Government Bond market5
Part 3: Suggestions and Conclusions6
References:7

Executive Summary
Objectives: Comparing Vietnamese Government Bonds and Japanese Government Bonds to make suggestions to customers. Methods: Comparing government bonds of the two countries in different terms. Results: Customers had better invest in Japanese government bonds. The Structure:

Types of bonds and their issuers; Process of issuance of Government Bonds How Government Bonds are traded in the market
Some statistic data about the Government Bond market during the past 5-10 years Compare Vietnamese Government Bonds and Japanese Government Bonds Advantages and Disadvantages of Vietnamese Government Bond market Prospect of Vietnamese Government Bond market

Suggestions and Conclusions

Part 1: Overview of the Japanese Government Bond Market
Types of bonds and their issuers:
1.Short-term bills (6-month and 1-year),
2.Medium-term notes (2-year and 5-year bonds),
3.Long-term bonds (10-year bonds) and
4.Super long-term bonds (20-year, 30-year and 40-year bonds) 5.JGBs for retail investors (3-year, 5-year and 10-year)

Process of issuance of Government Bonds
The most common process of issuing bonds is through underwriting. In underwriting, one or more securities firms or banks, forming a syndicate, buy an entire issue of bonds from an issuer and re-sell them to investors. Indeed, JGBs are mainly issued as either underwritten by primary dealers (PDs, so- called participants) and re-sold to the public market or direct subscription by BOJ and other government-affiliated parties. Major volume of JGB issuance and distribution are sustained by PDs, while BOJ underwriting has given assurance of balance of supply and demand in the JGB market. Methods of JGB issuance are broadly categorized into “issuance to the market”, “issuance to retail investors”, and “issuance to the public sector”.

How Government Bonds are traded in the market
1.There are so many issues of bonds that it is practically impossible to list all of them on exchanges; 2.Due to the wide variety of transaction forms and other specifications that different buyers and sellers require, it is difficult to instantly locate a matching counterparty for a particular transaction; 3.Tax on bond interest varies according to the tax profiles of bondholders; and 4.Corporate investors, who account for the bulk of the bond trading volume, tend to trade in large lots and often carry out complex transactions involving more than one issue

Some statistic data about the Government Bond market during the past 5-10 years The JGB secondary market consists of brokers such as JGB market special participants (PDs) and investors. Basically, the maintenance and enhancement of liquidity should be achieved by autonomous functioning of the market, which is stimulated by active transactions among such market participants. Consequently, issuing authorities should support this autonomous functioning by arranging amounts and maturities, as well as reopen issues in the primary market. However, the JGB market may also see a rapid fall in liquidity in times of global financial market turmoil such as that following the September 2008 Lehman Shock. In such circumstance, issuing authorities have flexibly executed auctions for enhanced-liquidity and buy-backs and measures utilized previously, and have pursued steady and smooth issuance of JGBs while...

References: (Amount of Local Government Bond issued, sorted by prefecture and Government-designated cities. FY 2008. See on 30/10/2014. )
(Japanese Government Bonds. 10/2014. See on 31/10/2014. )
(Nguyen Ngoc Anh. 11/2009. VIETNAM BOND MARKET. See on 2/11/2014. ).
(Local Government Bond System and Market in Japan. 08/2010. See on 3/11/2014 )
(PHAN THỊ THU HIỀN. 30/07/2014. Thị trường trái phiếu Việt Nam và định hướng phát triển. See on 2/11/2014. < http://www.tapchitaichinh.vn/Chung-khoan/Thi-truong-trai-phieu-Viet-Nam-va-dinh-huong-phat-trien/52086.tctc> ).
(Khánh Nhi.23/09/2014.Thị trường Trái phiếu Chính phủ Việt Nam tăng trưởng 23%/năm. See on 02/11/2014 )
(Tạp chí Tài chính số 11. 2013. Thị trường trái phiếu Việt Nam và định hướng phát triển. See on 3/11/2014 )
(Trái phiếu chính phủ tăng trưởng 23%. 24/092014. See on 3/11/2014. < http://www.baomoi.com/Trai-phieu-chinh-phu-tang-truong-23/126/14883742.epi> )
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