j Vint Fano Open, 2 it om ; sent Securities | Bipen ot Go Bills: Cash management bil ‘Cash Management Bills: (q “@ re characteristics of T-bils but are issue j haw the gore tess thon 91 days. Same like the T-bile theyat may RS ata dicount, and are redeemed at face value ot Suny, The tenure, notified amount and date of se oh EMBs depend on the temporary cash requirement of ent. The stent of het auction is made by the ne through a Press Release that would be alloted one day tx the dae of auction, Auction settlement is on a T+1 basis 46) Dated Government Securities: Dated government secures axe longterm securities that cany a fixed or floating coupe (interes rate), wich is paid on the face value, payable a fet periods (usally hal yearly). The tenor of dated securities ear fe up 10.30 years. | (o/State Development Loans: State govemments also mie loans from the market. Siate Development Loans (SDLs) a dated secures issued over an auction similar to the auctions conducted. for the dated securities sued by the cena government. Interest is serviced at half-yeary intervals, and te Principals repaid on the maturity date, Like the dated secures issued by the canal goverment, the SDLS issued by he sa govemments qualify for SLR. They are also qualified « Colateals for borowing over matket repo as well as borowing 12 elaible entities from the RBI under the Liquidity Adjustmer 4 Fecity (LAF). Sbecial Securities: In addition to T-Bils and dated seus {Sue by the Government of India under the market boroshs 10 tone gt Sovemment also issues special securities, fom tie comparice, ‘nities such as ol marketing companies, ett reimbuserent qe Meg coeration of India, and 50 ae ee secures at 32 COmPanies instead of cash susie Coupon vith apa STAY long-dted. secures canv"d 2 Oth dated sons 0 20-25 bass points ove te 2 no elle SL comparable matuiy. These secu mart ‘ecures, but can act as a colatel The beneficiary oil market Secuites in the secondary ™ °P0 transaction | Companies may divest those ee Interest and Prine re bei eat #04 Principal of akan t ‘of instruments such as the 9 inode new eGstered. Interest and Principal of em Tang of ideins fr the stipping andthe recor AC, “ears have been lsied The Sytten soemment “ ptich each cash flow ofthe fined ceupon ena me “inl 2 separate tradable zero ccupon bond aed eae et “ash flows are traded separately as independent Secu in the _ seondary market. The STRIPS in government senate ta ensure the availabilty of sovereign zero coupon bonds, which “ill fecitate the development of a macke-ceemincd Nt ~ toupon yield curve (ZCYC). The STRIPS val ako stone instutional investors with an addtional instument fy tee “asetliabiity management. Further, as the STRPS have nt “feinvestment risk (being zero coupon bonds, they can be “atraciive to retailnon- institutional. investors. The process of Stipping/teconstituting government securities i cared out at the RBI, the Public Debt Oifice (PDO) inthe PDO-NDS (Negofated Dealing System) at the option ofthe holder at any ime from the date of issuance of government security lis matuity, Al dated sovernment securities, other than floating rate bonds, having coupon payment dates on January 2 and July 2 (respective of the vear of maturitj) are eligible fr tipping! econsuton. The _tlatble government securities are held inthe Subsidiary General Ledger (SGL)/ Constituent Subsidiary General Ledger (CSGL) ‘counts maintained at the PDO, RBI. Mumbai. Physical “Mautties are not eligible for stippingteconttuion. The RRinimum amount of securities that needs fo be submited for ‘fippina/teconstitution will be 1 rote (face value) and multiples thereof Corporate Debt/Bond: ci to ae delivered frequeniy by puble sco, conn ‘stitutions, and private sector compani bere toytte debt secures have been created in Inca, patel 1990s.152 oe Vipul’s™ Financial Market Oe, This innovation has been inspired by variety cf factors, le important being the amplified volatility of interest rates ang chant in the tax and regulatory framework. on The corporate bond market is comparatively small ang a and the market for securitized assets has fallen short of experiay an 7 \A brief description of numerous types of corporate bond Is My | is given below: (ay Fixed Rate Bonds: These are bonds on which the coupon nid ~" Gg fixed for the complete life of the bond. Most govern, bonds are delivered as fixed rate bonds. ent ron Floating Rate Bonds: Floating rate bonds are securities that do not have a fixed coupon rate. The coupon is re-set at pre. announced intervals (say, every 6 months, or 1 year) by adding a spread over a base rate. In the case of utmost floating rate bonds issued by the Government of India so far, the base rate is the weighted average cut-off yield of the last three 364-day Treasury Bill auctions preceding the coupon re-set date, and the spread is decided through the auction. Floating rate bonds were first dispensed in India in September 1995. i) Zero Coupon Bonds: Zero coupon bonds are bonds with no coupon payments. Like T-Bills, they are issued at a discount to the face value. The Government of India issued such securities in the 90s; it has not issued zero coupon bonds after that. Sd) Capital Indexed Bonds: These are bonds, the principal of which is linked to an accepted index of inflation with view to protecting the holder from inflation. Capital indexed bonds, wi the principal hedged against inflation, were first issued in December 1997. These bonds matured in 2002. f government is currently working on a fresh issuance © Inflation Indexed Bonds wherein the payment of Co Coupon as well as the principal on the bonds would be linke an Inflation Index (Wholesale Price Index). In the Poe structure, the principal will be indexed and the coup” "1 calculated on the indexed principal, To provide the he ‘ Protection against actual inflation, the final WPI will be Y=" indexation, |153 pebt Market () Bonds with Call/Put Options: Bonds can also be issued with features of optionality, wherein the issuer can have the option to buy back (call option) or the investor can have the option to sell the bond (put option) to the issuer during the currency of the bond. The optionality on the bond could be exercised after the completion of five years from the date of issue on any coupon date falling thereafter. The government has the right to buy-back the bond. (call option) at par value (equal to the face value), while the investor has the right to sell the bond (put option) to the government at par value at the time of any of the half-yearly coupon dates starting from July 18, 2007.