Description

This well-researched document is prepared by RAMA KRISHNA VADLAMUDI, MUMBAI, INDIA (vrk_100@yahoo.co.in).


Bonds form a major part of treasuries. They are vital to the functioning of a treasury. Debt market in India is awash with various types of instruments. The debt market has registered an impressive growth since the early 90s with the liberalization of financial markets and the implementation of the Vaghul Committee recommendations. In the world of finance, debt instruments play a crucial role; hence, a basic understanding of certain concepts and methods used in debt valuation is essential for treasury managers. This assumes added significance in the light of the fact that the Government and the RBI have initiated a slew of measures to deepen and widen the debt markets in India and a new trading platform is being readied for a comprehensive debt market.

In this article, the fundamentals of bonds, ranging from bond features, factors influencing bond prices, bond risks to bond yields are analyzed. After reading this, readers will be in a better position to appreciate how bonds are valued, what causes the bond prices to move on a daily basis in the market and how to mitigate risks involved in bond prices.

One special feature of this document it details the factors influencing the bond prices.