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Debt Securities

Corporate Bonds

Corporate Bonds or ‘Debentures’ are issued by the public and private corporates. These Bonds usually carry a rating (normally AAA to D) as specified by the rating agencies, depending on a variety of fundamental factors pertaining to the company issuing the bonds. The predominant investors for these bonds are Banks, Mutual Funds, Insurance Companies, Financial Institutions, Primary Dealer, Broker, Pension Funds and Provident Funds.

Based on the type of Coupon, Bonds can be classified into the following categories:

  • Fixed Holder of the bond receives fixed Coupon every year till maturity.
  • Floating The coupon is linked to a benchmark index with some spread. The index is fixed on a specific date and spread (which is the fixed part) is added to arrive at the coupon payable.
  • Variable The coupon changes based on certain conditions. Simple examples are Step-up and Step-down bonds where the coupon increases or decreases by a fixed or variable rate.
  • Zero Coupon The bonds are issued at a discounted price and the holder of the bond receives the face value at maturity.

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