What
are Bonds?
Government Bonds
• Treasury
Bills
• Cash
Management Bills (CMBs)
• Dated
G-Secs
• State
Development Loans (SDLs)
• Treasury
Inflation-Protected Securities (TIPS)
• Zero-Coupon
Government Bonds
• Sovereign
Gold Bonds (SGBs)
•
Inflation-Indexed Bonds (IIBs)
Corporate & Special-Purpose Bonds
• Corporate
Bonds
•
Infrastructure Bonds
• Green Bonds
• Masala
Bonds
• Perpetual
Bonds (AT-1 Bonds)
• Zero-Coupon
Corporate Bonds
• Convertible
Bonds
• High-Yield
(Junk) Bonds
• Floating
Rate Bonds
• Callable
Bonds
•
Mortgage-Backed Securities (MBS)
What are Bonds?
• Bonds are
debt instruments where an issuer (government, company, or institution) borrows
money from investors for a fixed period at a specified interest rate.
• In return, the bondholder (investor) receives regular interest payments and the principal amount back at maturity.
• Bonds are
generally considered lower-risk compared to stocks, but their safety and
returns vary depending on the issuer’s creditworthiness and the type of bond.
.jpg)
A. Government-Related Bonds
1️. Treasury
Bills (T-Bills):
▪️Issued by:
Central Government (via RBI)
▪️Purpose:
Finance short-term cash flow needs
▪️Features:
➖Maturities:
91, 182, or 364 days
➖Issued
at a discount; no periodic interest
➖Very
low risk; high liquidity
2️.
Cash Management
Bills (CMBs):
▪️Issued by:
Central Government
▪️Purpose:
Address temporary cash shortages
▪️Features:
➖Very
short-term (typically <91 days)
➖Issued
at a discount
➖Low
risk, similar to T-Bills
3️.
Dated Government
Securities (G-Secs):
▪️Issued by:
Central Government
▪️Purpose:
Finance long-term government expenditure
▪️Features:
➖Maturities:
5–30+
years
➖Fixed
(or sometimes floating) coupon payments; traded in secondary markets
➖Considered
very safe
4️.
State Development
Loans (SDLs):
▪️Issued by:
State Governments
▪️Purpose:
Fund developmental projects and manage state fiscal deficits
▪️Features:
➖Long-term
bonds with fixed coupon payments
➖Similar
structure to G-Secs
➖
Relatively low risk, but marginally higher than central government bonds
5️.
Treasury
Inflation-Protected Securities (TIPS)/Capital Indexed Bonds:
▪️Issued by:
Central Government
▪️Purpose:
Protect investors from inflation
▪️Features:
➖Principal
adjusted based on inflation index
➖Periodic
coupon on adjusted principal
6️.
Zero-Coupon
Goverment Bonds:
▪️Issued by:
Government
▪️Purpose:
Raise funds without periodic interest payments
▪️Features:
➖
Issued at a discount; no interim coupons
➖
Redeemed at face value at maturity
➖
Rarely issued in standard auctions, but can be used as special securities.
7️.
Floating Rate
Bonds:
▪️Issued by:
Government or Corporates
▪️Purpose:
Mitigate interest rate risk
▪️Features:
➖Coupon
rates reset periodically based on a benchmark (e.g., MIBOR)
➖Provides
variable interest payments
▪️Interest/Risk:
➖Adjusts
with market rates; lower interest rate risk
➖Uncertain
returns if rates fall
8️.
Sovereign Gold
Bonds (SGBs)
▪️Issuer: RBI
on behalf of Government of India.
▪️Purpose: An
alternative to holding physical gold; pays a fixed interest rate (~2.5% p.a.).
9️.
Inflation-Indexed
Bonds (IIBs)
▪️Issuer: RBI
(for Central Govt).
▪️Principal/Coupon
linked to an inflation index (CPI/WPI).
▪️Shields
investors from inflation risk.