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Corporate Bond Market


Corporate Bonds refers to securities issued by public/private sector corporates for a variety of business purposes. These securities are issued by Public Sector Enterprises, Public Sector Banks, All India Financial Institutions, Private Sector Companies, etc. for their business activities. The tenor of such securities is generally in the range of 1-15 years. However, the tenor may vary depending upon the funding requirements of the issuer. Corporate Bonds are not sovereign and are serviced by the entity issuing them. Hence, they carry a risk of default on part of the issuing entity in fulfilling its interest or principal payment obligations.
 
Corporate Bonds carry a rating (usually AAA to D) as specified by the rating agencies determined on the basis of the fundamental strength of the issuer. These ratings indicate the level of risk of default of the issuer, with AAA indicating the highest safety and D indicating a high level of default. These ratings are reviewed on a periodic basis. These non-SLR instruments are priced at a spread over the corresponding government security depending on the level of perceived risk. Frequency of interest payments could be annual/semi-annual/quarterly/monthly, etc depending on each issuer. Also, the face value of the security is specific to each issue. The most common ones being, Rs 1 lac, Rs 10 lacs or Rs 1 Cr. Trades in the non SLR market can be conducted on T+0, T+1 and T+2 basis.
 
Furthermore, the structure of the corporate bond may vary as per the requirements of the issuer. There are different types of corporate bonds such fixed rate bonds, floating rate bonds, fixed rates bonds with put/call option, hybrid bonds, zero-coupon bonds, amongst others. Day count convention too, varies with each issue. An offer document is prepared for each primary issue which enumerates all the specifics to a particular issue. In the interest of improving liquidity in the corporate bond repo market, as well as providing an alternative to Government securities repo, the RBI has introduced tri-party repos. They are a type of contract where a third party acts as an intermediary between the borrower and the lender to facilitate services like collateral collection, payment and settlement, custody and management through the life of the transaction.
 
The non SLR market is largely an Over the Counter market whereby the trades are settled on the respective Clearing Platforms (namely, NSCCL, ICCL and MSEI CCL). Efforts have also been made to facilitate online trading into this segment. Trading on NSE and BSE is permitted under the Wholesale Debt Market platforms. The Corporate Debt Market in India is at a developing stage in terms of an efficient price discovery mechanism as well as market participation as compared to the Government Securities market. Hence, market activity is yet to pick up in terms of volumes and number of transactions.
 
STCI PD actively transacts in the Non-SLR segment, namely Corporate Bonds, CPs, and CDs. Clients interested buying/selling Corporate Bonds may contact our Sales Personnel on 022-66202224/25/28. We endeavor to provide the best possible returns to our clients, keeping in line with their overall investment objectives.
 
 
 

Latest News

Reserve Bank of India
Reserve Bank of India kept policy rates unchanged while changing the stance to calibrated tightening from neutral in its Fourth Bi-monthly Monetary Policy. Consequently, key policy rates remained unchanged – Repo rate at 6.50%, Reverse Repo at 6.25% and Marginal Standing Facility (MSF) at 6.75%
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Inflation projections for 2018-19
Inflation projections for 2018-19 were revised downside as food inflation has remained benign. Including the impact of HRA, inflation is projected to be at 4% in Q2 FY19 (4.6% prev), 3.9%-4.5% in H2 FY19 (4.8% prev) and 4.8% in Q1 FY20 (5% prev). The GDP projection for FY19 has been maintained at 7.4% –with 7.5% in Q2 FY19 and 7.3-7.4% for H2 FY19. GDP growth for Q1 FY20 is projected at 7.4% (7.5% prev).
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Belying market expectations
Belying market expectations, headline consumer price inflation for Sep-18 stood at 3.77% compared to Aug-18 reading of 3.69%, remaining below the RBI’s medium term inflation target of 4% for second consecutive month. Core inflation also moderated to 5.81% vs. revised estimate of 5.92% last month (5.87% previously).
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September Wholesale
September Wholesale Price Index came in at 5.13% as against 4.53% in the August mainly due to rise in prices of Fuel and power as well as Manufactured Products. At the same time, July WPI print was revised upwards to 5.27% from 5.09% previously.
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Indias September manufacturing
India's September manufacturing PMI came in at 52.2, rising from 51.7 in August due to gains in new orders, output and employment.
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