Escolar Documentos
Profissional Documentos
Cultura Documentos
Debt Markets
Market where fixed income securities of
Types of Instruments
Central Government
Zero Coupon Bonds
Coupon Bearing bonds/Dated securities
Treasury Bills
FRBs
STRIPS
State Government
Coupon Bearing Bonds
FRBs
Public Sector
Debentures Fixed and Floating
Taxable/Tax-free bonds and debentures
CPs
ZCBs/DDBs
Guaranteed Bonds Central or State Government Guaranteed
Private Sector Corporate, Banks. FIs
Regulators
Government Securities and Money Markets
Government Securities
Market
Important source of borrowing for the government
Benchmark for pricing corporate papers of
varying maturities
Pre-requisite for development of corporate bond
market
Used as a tool for managing fiscal and monetary
policies
OMOs
SLR
Fiscal Deficit
makers/intermediaries
Banks captive investors through SLRs
Mutual Funds launched gilt funds
Insurance Cos Regulatory requirement to
invest in Gsec
PFs and Pension Funds
FIIs within permissible limits
Brokers
Primary Market
Annual borrowing amount announced in the budget
Borrowing calendar released semi-annually
Underwriting PDs /Underwriting commission
Auction Process on Fridays
Multiple Price Method
Uniform Price Method
Secondary Market
Wholesale segment
Active market through SGL or CSGL with PDO-RBI
Lot size of 5 Crs
NDS-OM
Broker/PD
Settlement on NDS by RBI/CCIL
T+1
DVP III
Reporting on NSE/CCIL
Retail segment
SGL/physical form/demat
Less than 1 Cr
Settled directly
Broker market
No reporting
(SDLs)
Issued through Auction process
Only 10 yr issuances in primary market
Qualify for SLR but not for repo
Trade at slightly higher levels than central
government bonds but lower than corporate
bonds
Similar Secondary Market operations
Innovative Debt
Instruments
Floating rate bonds
Zero coupon bonds
Deep discount bonds
Fully Convertible Debentures with Interest (optional)
Perpetual Bonds
Securitised paper
ABS
MBS
PTC
CDO
SRs issued by Asset Reconstruction companies
Structured Securities
Securities backed by a pool of loans or receivables
Asset Backed Security (ABS) is a security created from a
Structure of ABS/MBS
Cash flows of similar assets are pooled together
Allocated into tranches based on credit risk
Tranches receive returns in order of their seniority
Structure of ABS
Senior Tranche
Principal-75%
Return 6%
Asset 1
Asset 2
Asset 3
Asset N
Total = $
100 Mn
SP
V
Mezzanine Tranche
Principal -20%
Return 10%
Equity Tranche
Principal - 5%
Return 30%
Waterfall Mechanism
Asset
Cash
Flows
Senior
Tranche
Mezzanine Tranche
Equity Tranche
21
ABS- CDOs
Assets
Mezzanine Tranche
(25%) BBB
Equity Tranche (5%)
Not Rated
Equity Tranche (10%)
Losses on
Mezzanine
Tranche of
ABS
Losses on
Equity
Tranche of
ABS CDO
Losses on
Mezzanine
Tranche of
ABS CDO
Losses on
Senior
Tranche of
ABS CDO
10%
33.3%
100%
93.3%
0%
13%
53.3%
100%
100%
28.2%
17%
80.0%
100%
100%
69.2%
20%
100%
100%
100%
100%