Introduction to Bond Market

 Market for trading govt bonds, corporate bonds and tax free
bonds
 Fixed Income instrument, less volatile
 Usually higher maturity time

Objectives
 Access for long term capital for Corporates and Government.
 Raise funds for various expansions or developments.
 Avenue of investment for a risk averse investor
 Types of Bond Market
 Primary Bond Market
 Issuer sells directly to the buyers
 Issuance of new debt securities
 Secondary Bond Market
 Trading of the bonds bought in primary market
 Brokers help in trading, buying or selling of the
securities
 Debentures

 Similar to bond except the securitization condition

 They are unsecured
 Burden free asset for the issuer
 Higher coupon rate

Types-
 Convertible Debentures
 Non Convertible Debentures
Terminologies of Bonds
 Face Value
 Coupon Rate
 Yield to Maturity
 Date of Issue
 Date of Maturity
 IP term and date
 Credit Rating
Terminologies of Bonds
 Face Value

The face value of a bond is the price that the issuer pays

at the time of maturity, also referred to as “par value.”

 Coupon Rate

A coupon rate is the yield paid by a fixed income security,

which is the annual coupon payments divided by the
bond's face or par value
 Yield to Maturity

The yield to maturity (YTM) is the percentage rate of

return for a bond assuming that the investor holds the

asset until its maturity date

 Date of Issue

The issue date is simply the date on which a bond is issued and

begins to accrue interest

 Date of Maturity

The maturity date refers to the date when the

principal amount of an investment, such as a

bond, note, or other debt instrument becomes

due and is repaid to the investor

 IP Term and Date

 Interest Payment term is the frequency at which the

Interest is paid to the holder/ bearer of the bond
 IP date is fixed in case of bonds
 Credit Rating

 A bond rating indicates its credit quality

 The rating takes into consideration a bond issuer's financial strength or its
ability to pay a bond's principal and interest in a timely fashion
 Higher the rating better it is
 AAA/ AA+/AA/AA-/BBB+ and so on
 Functions of Bond Market

 The major function of the Bond markets is to cater to the fund

requirements of the corporates and government companies
 Help to raise in stable source of funds

 Support the infrastructural development undertaken by the

government and expansion plans of the companies
 Fixed income to Investors