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What is the Debt Market? It is a market meant for trading (i.e. buying or selling) fixed income instruments.

Fixed income instruments could be securi es issued by Central and State Governments, Municipal Corpora ons, Govt. Bodies or by private en es like financial instuons, banks, corporates, etc. What is bonds/debt? Simply put, a bond/debt can be defined as a loan for which an investor is the lender. The issuer of the bond pays the investor interest (at a predetermined rate and schedule) in return for the funding. The maturity date refers to the date on which the issuer has to repay the principal to the investor. What is the difference between debt and equity? When an investor invests money via equity, he becomes an owner in the corpora on issuing the equity shares. With ownership he also gets vong right in the company and a share in future profits. In case of debt, the investor becomes a creditor to the issuing en ty. As a creditor, he has higher claim to the assets of the enty as compared to a shareholder in the event of the company filing for bankruptcy. However, a debt investor does not get vong rights or a share in future profits. He is only repaid in the form of a predetermined interest rate. What is Face Value/Par Value? Face value (or par value or principal) is the amount the investor will get back from the issuer once the debt instrument matures. Bonds may be issued at face value or at a discount to the face value. Investors should also keep in mind that the price at which the instrument trades in the market is not the face value. The price of an instrument can keep fluctuang throughout its life based on market forces. If a bond trades for a price higher than its face value, then it is said to be traded at a premium. If it is trading below the face value, it is said to be traded at a discount. What is Coupon or Interest Rate? The coupon is the amount the investor will receive via interest payments for the debt instrument. It is called coupon, since earlier there used to be physical coupons on the instrument which the holder had to tear off to redeem the interest. While most bonds pay interest on a semi-annual basis, some may even pay interest on a monthly, quarterly or annual basis. The interest is calculated and paid on the face value of the instrument, irrespec ve of its price in the market. Based on the instrument, the coupon may either be fixed or floang. In the case of a fixed coupon the rate of interest remain constant ll the maturity of the instrument. In case of a floang-rate coupon, the interest rate may be adjusted by the issuer if required. What is the trading structure in the Wholesale Debt Market? Globally debt markets are dominated by Government securi es, which dominate close to 50-75% of the trading volumes in all markets. Instruments issued by Central government in India account for close to 90% of the trading volumes while those issues by State governments account for 3-4% of the trading volumes. Who are the main investors of Government Securi es in India? Banks and Financial ins tu ons are the largest investors in G-Secs. In fact, banks account for more than 60% of the transac ons in the Wholesale debt market.

What are the main features of G-Secs and T-Bills in India? All Government securi es in India have a face value of Rs. 10 and are issued by RBI on behalf of the Central government. G-Secs are normally interest bearing, and have semi-annual interest payments for a period of 5-30 years. Treasury bills or T-bills are short term securi es issued by RBI (for Government of India) meant to fund temporary requirements. The maturity on T-bills ranges from 91 days to 364 days. T-bills have a face value of Rs. 100 but do not have any interest payment. They are generally issued at a discount and redeemed at face-value at the end of the maturity period. What is the issuance process of G-Secs? Government securi es are generally issued by RBI on either a yield based or price-based auc on. Recently, RBI has announced a non-compe ve bidding facility for retail investors in G-Secs.