Bonanza Fixed Income Products

MARKET TRENDS

REGISTER

INTRODUCTION

CHARACTERISTICS OF A BOND

A bond issued at a face value to the bond holder. For example, Rs 1000 per bond.

Term to maturity of a bond changes every day from the date of issue of the bond until its maturity.

The issuer has to repay the principal amount on the maturity date.

Total amount invested by the bondholder in a bond issue is the principal amount.

For example you invest Rs 10,000 and you get total 10 bonds with face value worth of Rs 1000 each.

The coupon is the interest rate that the issuer pays to the security holder.

It refers to the periodic interest payments that are made by the issuer of the bond to the bond holder and are expressed as a percentage of the face value.

For example, just like your Bank FD payments.

TYPES OF BONDS

Perpetual Bonds

These bonds have no maturity. The investor gets a fixed interest every year. The issuer generally has a call option to redeem the Bonds after 5-10 years. Issued by Banks and NBFC to meet the capital adequacy requirements.

Fixed Maturity Bonds/ Debentures

Have a fixed maturity period of 5-10 years after which the bonds are redeemed to the Investor. Has a coupon or interest rate fixed until maturity of a bond. Issued by PSUs, Banks, NBFCs, Corporates.

Tax-Free Bonds

These bonds are issued normally by Public Financial Institutions such as REC, NHAI, HUDCO, IIFCL and the annual interest received from these Bonds in tax-free in hands of Investor.

Capital Gain Bonds

These bonds are eligible for investment of capital gains accrued from the sale of the property. The capital gain invested in these bonds become tax-free. They carry a fixed coupon and have a maturity of 3-5 years

Sovereign bonds

These Bonds are issued by Reserve Bank of India on behalf of Government of India with a fixed maturity of 6 years.

Corporate FDs

These are the securities issued by corporates to inviting deposits from the public. These FDs have a fixed maturity and fixed coupon.

WHY INVEST IN BONDS

PARTICIPANTS

Central Governments

Raising money through bond issuances, to fund budgetary deficits and other short and long term funding requirements.

Foreign Institutional Investors

FIIs can invest in Government Securities upto US $ 5 billion and in Corporate Debt upto US $ 15 billion.

State Governments

Consist of municipalities and local bodies, which issue securities in the debt markets to fund their developmental projects, as well as to finance their budgetary deficits.

Primary Dealers

Market intermediaries appointed by RBI to underwrite and make market in government securities

Have access to the call markets and repo markets for funds.

Public Sector Units

Large issuers of debt securities, for raising funds to meet the long term and working capital needs.

These corporations are also investors in bonds issued in the debt markets.

Public Sector Financial Institutions

Access debt markets with bonds for funding their financing requirements and working capital needs.

They also invest in bonds issued by other entities in the debt markets.

Corporate treasuries

Issue short and long term paper to meet the financial requirements of the corporate sector.

They are also investors in debt securities issued in the debt market.

Provident Funds

Large investors in the bond markets

Prudential regulations governing the deployment of the funds they mobilize, mandate investments pre-dominantly in treasury and PSU bonds.

Charitable Institutions, Trusts and Societies

Large investors in the debt markets

They are, however, governed by their rules and byelaws with respect to the kind of bonds they can buy and the manner in which they can trade on their debt portfolios.

Reserve Bank of India

An investment banker to the government

Raises funds for the government through bond and t-bill issues

Participates in the market through open-market operations.

Mutual Funds

Emerged as another important player in the debt markets

Owing primarily to the growing number of bond funds that have mobilized significant amounts from the investors.

Most mutual funds also have specialised bond funds such as gilt funds and liquid.

Banks

  • Largest investors in the debt markets, particularly the treasury bond and bill markets.
  • Have a statutory requirement to hold a certain percentage of their deposits (mandatory requirement is 25% of deposits) in approved securities (all government bonds qualify) to satisfy the statutory liquidity requirements.
  • Large participants in the call money and overnight markets.
  • Arrangers of commercial paper issues of corporates.
  • Active in the inter-bank term markets and repo markets for their short term funding requirements.
  • Issue CDs and bonds in the debt markets.
  • ISSUER OF BONDS & INSTRUMENTS

    Market Segment Issuer Maturity Instruments
    Government Securities Central Government 2-30 Years (Central Govt. Dated Securities), 91 – 364 Days (T Bills), 5 – 13 Years (State Govt. Dated Securities) Zero Coupon Bonds, Coupon Bearing Bonds, Treasury Bills, STRIPS
    State Governments Coupon Bearing Bonds.
    Public Sector Bonds Government Agencies / Statutory Bodies 5 – 10 Years Govt. Guaranteed Bonds, Debentures
    Public Sector Units 5 – 10 Years PSU Bonds, Debentures, Commercial Paper
    Private Sector Bonds Corporates 15 Days to 1 Year (CP) & (CD), 1 – 10 Years (CD) & Bank Bonds. 1 – 7 Years (Municipal Bonds) Debentures, Bonds, Commercial Paper, Floating Rate Bonds, Zero Coupon Bonds, Inter-Corporate Deposits
    Banks Certificates of Deposits, Debentures, Bonds
    Financial Institutions Certificates of Deposits, Bonds

    CREDIT RATING

    Credit Rating - Assessing the Credit Quality

    Credit Rating Agencies in India

    • CRISIL: Credit Rating Information Services of India Limited

    • ICRA: Investment Information and credit rating agency of India Ltd

    • CARE: Credit analysis and research Ltd

    • India Ratings and Research

    • Brickwork Ratings India Private Ltd.

    Instruments by Credit Quality - Maturity > 1 Years (Bonds)

    • AAA: Highest Safety

    • AA: High Safety

    • A: Adequate Safety

    Instruments by Credit Quality -Maturity < 1 Years (CPs, CDs and Bonds up to 1 year maturity)

    • A1: Highest Safety

    • A2: High Safety

    • A3: Adequate Safety

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    SEBI Regn. No.: INM000012306 | NSE CM: INB 230637836 | NSE F&O: INF 230637836 | NSE CDS: INE 230637836 | BSE CM: INB 011110237 | BSE F&O: INF 011110237 | MCX-SX: INE 260637836 USE: INE 270637833 | CDSL: a) 120 33500 | b) 12033503 (Delhi) | NSDL: a) IN 301477 | b) IN 301688 (Delhi) | PMS: INP 000000985 | AMFI: ARN -0186

    CONTACT US

    While we do what we do best, we are prepared to perform at a different level altogether, in order to add more and more gains to your portfolio. If you would like to know further details or discuss the proposal with our representatives, kindly contact us

    Corporate Office

    Bonanza House, Plot No. M-2,

    Cama Industrial Estate, Walbhat Road,

    Goregaon (East), Mumbai 400063

    Phone

    Phone Number: 022-30863790 / 022-30863780

    E-mail

    Support: bddesk@bonanzaonline.com