Bonds, also called fixed income or debt securitiesBonds, also called fixed income or debt securities

Issued by a government or company when it borrows money. Issued by a government or company when it borrows money.

Investment options where Investment options where

Investor invests with the assurance of fixed income and protection of Investor invests with the assurance of fixed income and protection of

principalprincipal

A loan contract between the issuer and the investorA loan contract between the issuer and the investor

The issuer promises to pay back this amount by a pre-specified dateThe issuer promises to pay back this amount by a pre-specified date

The issuer also promises to pay interest on the borrowed money on pre-The issuer also promises to pay interest on the borrowed money on pre-

specified datesspecified dates

Issuer: The issuer is usually the Central Government or State Governments (Government Securities) or a Corporate (Corporate Bonds).

Maturity: The period at the end of which the instrument will be redeemed.

Coupon: The interest that will be paid. Usually paid at regular intervals i.e. monthly, half-yearly, yearly.

(Exception: Zero Coupon Bonds)Usually specified in absolute terms. (Exception: Floating Rate

Bonds)

Par ValuePar Value: The reference amount for calculating the : The reference amount for calculating the return. Usually it is the amount paid back to the investor return. Usually it is the amount paid back to the investor at maturity.at maturity.

Other FeaturesOther Features::Put/ Call DatesPut/ Call Dates: Pre-specified dates (before maturity) : Pre-specified dates (before maturity)

on which the investor can ask for his money back (put) on which the investor can ask for his money back (put) or the issuer can compulsorily redeem the bond (call).or the issuer can compulsorily redeem the bond (call).

ConvertibilityConvertibility: An option to convert part or all of the : An option to convert part or all of the repayable amount into shares.repayable amount into shares.

Fixed Income Markets

Money Market G-Sec MarketCorporate Bond

Market

Money Market is the financial market where short-term (one year or less) debt securities are issued and traded.

Typical Money Market instruments available to the investor include treasury bills (TB's), certificates of deposit (CD's), commercial papers(CP’s),

These debt obligations are much like cash because they are highly liquid. The Money Market provides financial institutions and large corporations with quick cash for short-term needs.

Treasury Bills are money market instruments to finance the short term requirements of the Government of India. These are discounted securities and thus are issued at a discount to face value. The return to the investor is the difference between the maturity value and issue price.

There are different types of Treasury bills based on the maturity period. In India, at present, the Treasury Bills are the 91-days, 182 days and 364-days Treasury bills.

ZCBs do not have regular interest (coupon) payments like traditional bonds, are sold at a discount and redeemed at par on final maturity.

Call money , Repo and CBLO are overnight money market

instruments

Call money is unsecured lending and borrowing and is restricted

to banks and primary dealers

Repo is repurchase market and is restricted to entities having RBI

accounts

CBLO is collateralized borrowing and lending and settlement is

guaranteed by CCIL

Non government issuers constitute corporate bonds

Corporate bonds carry credit riskLiquidity risk also existsMarket does not have an electronic

platformFewer number of participants