Who trades in the debt market?


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The profile of financial instruments which are traded in the debt market include the
following :
(a) Government Securities, such as Treasury bills, Zero coupon bonds, Coupon bearing
bonds, etc.
(b) Public Sector Bonds, such as bonds issued by public sector entities like government
agencies, statutory bodies. The financial instruments issued by these bodies include
Debentures, PSU Bonds, Government Guaranteed Bonds and Commercial Paper.

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(c) Private Sector Bonds are issued by private sector entities such as companies,
financial institutions, banks. The financial securities issued by these institutions
include Debentures, Bonds, Commercial Paper, Floating Rate Bonds, Zero-Coupon
Bonds, Intercorporate Deposits, and Certificate of Deposits.

Investment in fixed income securities is profitable to the banks and other investors. They
ensure steady and constant return by way of interest and repayment of principal of
maturity of the instrument. These securities are issued by eligible entities of standing
against the money borrowed by them from the investors. This guarantees safety of funds
invested. Such debt is usually secured against the assets of the company. Most of the
fixed income securities are issued by government or government agencies who offer risk free
return on the investment.
Debt market facilitates mobilization of resources at reasonable cost. It provides greater
funding avenues to public and private sector projects, and thus reduces the pressure on
institutional financing. There is enhanced resource mobilization by unlocking liquidity retail
investments like gold and silver. It also helps financing the development activities of the
government. It facilitates the efficient liquidity management in tune with the overall short term
and long-term objectives of the economic planning. The price of an instrument is
determined in the market by the operation of the forces of demand and supply yield and
the market price of the bond are inversely related.

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