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PSU Bonds:
Public Sector Undertaking Bonds:
These are Medium or long term debt instruments issued by Public Sector Undertakings (PSUs). The term usually denotes bonds issued by the central PSUs (ie PSUs funded by and under the administrative control of the Government of India). Most of the PSU Bonds are sold on Private Placement Basis to the targeted investors at Market Determined Interest Rates. Often investment bankers are roped in as arrangers to this issue. Most of the PSU Bonds are transferable and endorsement at delivery and are issued in the form of Usance Promissory Note.
In case of tax free bonds, normally such bonds accompany post dated interest cheque / warrants.
Bonds of Public Financial Institutions (PFIs) / AIFIs:
Apart from public sector undertakings, Financial Institutions are also allowed to issue bonds. They issue bonds in 2 ways:
1) Through public issues targeted at retail investors and trusts
2) Through private placements to large institutional investors.
PFIs offer bonds with different features to meet the different needs of investors eg. Monthly return bonds, Quarterly coupon bearing Bonds, cumulative interest Bonds, step up bonds etc. Some PFIs are allowed to issue bonds (as per their respective Acts) in the form of book entry hence, PFIs like IDBI Bank, EXIM Bank, NHB, do issue Bonds in physical form (in the form of holding certificate or debenture certificate as the case may be,in book entry form) PFIs who have provision to issue bond in the form of book entry are permitted under the Respective Acts to design a special transfer form to allow transfer of such securities. Nominal stamp duty / transfer fee is payable on transfer transactions.
Corporate Bond: [Click here for latest quotes]
A Corporate Bond is a bond issued by a corporation. The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date. Sometimes, the term "Corporate Bonds" is used to include all bonds except those issued by Governments in their own currencies. Strictly speaking, however, it only applies to those issued by corporations. The bonds of local authorities and supranational organizations do not fit in either category. Corporate Bonds are often listed on major Stock Exchange (bonds there are called "listed" bonds) and ECNs Electronic communication network like MarketAxess, and the Coupon (bond) (i.e. interest payment) is usually taxable. Sometimes this coupon can be zero with a high redemption value. However, despite being listed on exchanges, the vast majority of trading volume in corporate bonds in most developed markets takes place in decentralized, dealer based, Over the counter (finance) markets. Some corporate bonds have an embedded Call option that allows the issuer to redeem the debt before its maturity date. Other bonds, known as Convertible bond, allow investors to convert the bond into equity.
· Convertible Bonds
· Junk Bonds
· Strips Bond
· Zero Coupon Bonds
· Treasury Inflation-Adjusted Securities
· High Yield Bonds
Convertible Bonds: If one invests in a corporate convertible bond he is said to be investing in actually two things by paying the price of one. One does not only get the bond security but also gets interest payments on a regular basis alongside with the right to convert the bond's face value of a company.
Junk Bonds: When one buys a bond, one actually provides loans to that particular company whose bonds he has bought. The company instead provides a certain rate of interest to the bond buyer. This kind of bond is actually low rated bond that provides a high rate of interest and also possess a high rate of risk.
Zero Coupon Bond: This is a kind of bond that does not pay any amount of coupon but is traded with a very high rate of discount. One can though have income from this bond through the profit that is arrived at when the bond achieves maturity. This kind of zero coupon bond is also known as the accrual of bond.
Strips Bond: Strips are one kind of Debt Securities which are actually created by the stripping of the coupon. These are actually treasury bonds which is only devoid of the strips is been separated. The investor has the option of choosing out the interest of the strips bond or the principal of the bond.
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