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Debt Market (Group 3)

The debt market is a platform for trading debt securities issued by governments and companies, providing a safer investment option with minimal price fluctuations. It plays a crucial role in connecting borrowers and lenders, facilitating capital flow, and promoting economic stability. The market is classified into government securities and corporate bonds, each serving different purposes and risk levels for investors.

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msmuskan31bhardwaj2004
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29 views15 pages

Debt Market (Group 3)

The debt market is a platform for trading debt securities issued by governments and companies, providing a safer investment option with minimal price fluctuations. It plays a crucial role in connecting borrowers and lenders, facilitating capital flow, and promoting economic stability. The market is classified into government securities and corporate bonds, each serving different purposes and risk levels for investors.

Uploaded by

msmuskan31bhardwaj2004
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Debt Financial market and institutions

Market
Team members:
152 Saniya Mishra
175 Sanya Rajput
187 Muskan Bhardwaj
201 Mihika Kundu
Debt Market :

Concept Significance Classificatio


n
The debt market has emerged as
The debt market is crucial in Debt market is classified
a preferred investment option for
connecting borrowers and into two groups :
many investors due to its
lenders, facilitating the flow of Government securities
relatively safer nature with
capital and promoting market and corporate
minimal price fluctuations
bond market
compared to other share market investment.
investments.
CONCEPT
:-
The debt
preferred
market has
investment
emerged
option for
as
many
a

investors due to its relatively safer nature


with minimal price fluctuations compared to
other share market investments.

Therefore, understanding the basics of debt


market is crucial for those looking to venture
into it .
What Is Debt
Market ?
The debt market is a platform where debt
securities are traded by investors.

These securities are issued by companies and


the government authorities to raise capital for
business operations, infrastructure development,
and other projects.
The debt market is crucial in connecting borrowers and
lenders, facilitating the flow of capital and promoting
investment.

The securities traded in the debt market include treasury


bills, government bonds, and corporate bonds, with investors
receiving coupon payments as periodic interest payments.

These securities are considered a safe investment option due


to the steady income stream they provide.

Despite not attaining ownership or equity in the issuer,


investors play a significant role in promoting economic
growth and stability by providing funding to businesses and
governments.
Significance of Debt
Marekt :
1. Source of Capital for Governments & Companies

2. Lower Risk for Investors

3. Helps in Economic Stability

4. Diversification for Investors

5. Interest Rate Indicator

6. Liquidity in Financial Markets

7. Supports Infrastructure Development


Examples:
1. U.S. Government Bonds (2023): In 2023, the U.S. government issued more long-term bonds (like Treasury
bonds) to cover its budget deficits. These deficits were partly due to high spending during the COVID-19
pandemic. Since the U.S. needs to borrow more money, it offers higher interest rates (yields) on these bonds
to attract investors.

2. Social Bonds by Corporations (Ford Foundation, 2020): After the pandemic, companies like the **Ford
Foundation issued social bonds—a type of bond aimed at funding projects that help society, such as healthcare
or education. In 2020, Ford issued $1 billion worth of these bonds, showing how businesses are using the debt
market to address social issues.

3. Emerging Markets (China, 2023): Countries like China have also increased their bond sales to fund recovery
efforts post-COVID. China’s bond issuance doubled between 2022 and 2023, allowing it to raise money to
boost its economy

These examples show how both governments and companies use the debt market to raise money for various
needs, from fixing budget deficits to funding social projects.
Debt Market can be classified
as :

Governmen Corporate
t securities bonds
Government
securities :-
•Government securities (G-secs) are the debt instruments
issued by the central Government or the State
Government.

• Such securities are issued for the short term as well as


long term.

• The RBI acts as the "registry" of G-Secs and hence deals


with the issue, interest payment, and buying and selling of
the securities.

• Since these securities are backed by the Government,


they carry no risk of default. Hence, they are also known as
#1 Treasury Bills
• T-bills are issued by the Central Government.
• These are short-term instruments.
•The maturity period of these securities is under 1 year.
•T-Bills are zero coupon securities. Therefore, these securities do not pay any
interest on the investment.

#2 Cash Management Bills


•CMBS are zero coupon securities similar to T-bills and were launched in 2010
by the Government of India in consultation with RBI.
• These are ultra-short-term investments.
• The maturity period is under 91 days.
• It is used by the Government of India to strategically meet temporary cash
show needs.
#3 Dated Government securities.
• Dated G-Sees are securities which carry a fixed or floating interest rate.
• These are long-term money market instruments.
•The tenure starts from 5 years up to 40 years.
• The coupon rate is applied on the instrument's face value. The coupon is
paid on a half yearly basis.

#4 state Development Loans


• SDLS are issued by the State Governments of India.
•These instruments help the state governments in funding their activities
and meeting their budgetary needs.
• It offers a wide range of investment tenures.
• These government securities are similar to dated G-Secs.
Corporate bonds :-
• Corporate bonds are debt securities
issued by companies to raise capital.

• When a corporation issues a bond, it


borrows money from investors in exchange
for periodic interest payments (called the
"coupon") and the promise to repay the
bond's face value (or principal) at a set
maturity date.
Types of Corporate
bonds :-
I. Mortgage Bonds :-

1.Think of mortgage bonds like home loans for big


companies.
2.They are backed by real estate or physical assets.
3.If the company cannot pay, you get a claim on the
property.

II. Collateral Trust Bonds :-

1.Collateral trust bonds are like a security deposit.


2.They are backed by stocks, bonds, or other assets.
Types of Corporate
bonds :-
III. Guaranteed Bonds :-

1.Guaranteed bonds are super safe.


2.They come with a promise from a third party, like a
government or another company, to pay if the issuer cannot.

IV. High-Yield Corporate Bonds :-

1.High-yield corporate bonds are riskier.


2.They offer higher interest rates because the companies
issuing them might need more stability.
3.You could make more money, but there is a greater chance
of losing it.
Thank
F O R Y O U R A T T E N T I O N

You

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