Bond Market

Bond market is the market where bonds are purchased or sold. In other words, a market in which one party is ready to sell the bonds and other party is ready to buy the bonds, that market is called bond market. Like share market, bond market is totally converted online. There are very low numbers of companies whose bonds are listed in stock exchange. It means, you need not go to bond market physically. You have to just connect yourself with broker or dealer in your local area. $ 822 billion bonds are purchased and sold in USA Bond market daily basis. Bond market can be divided into corporate bond market. It is that bond market where private companies collect money in the form of debt. Second category is government bond market where companies can invest in government bonds. We also divide bond market into municipal bond market. If we look on the data of bond market size, we find many unbelievable data. If we try to do accounting of bond market, we find that global business of Bond market has reached to 83$ trillion. This market is also called fixed income market because; debtor has to pay interest for his received amount. Even company has received loss, at that time; company has to pay interest on bond because after issuing company becomes debtor and bond holder becomes creditor of company. Like stock market indexing, bond marketing indexing is done on the basis of type of bonds.

Bond market in India

For promoting the trade of debt or bond market in India, Govt. of India has given many facilities to Indian financial companies. In these facilities, exemption of tax on interest income from govt. bond is major development for bond market in India.

The GOI bond market did not use trading on an exchange. It featured bilateral negotiation between dealers. The market thus lacked price-time priority and the bilateral transactions imposed counterparty credit risk on participants. This narrowed down the market into a “club” with homogeneous credit risk.
Large numbers of corporate bonds are also traded in India.


Kisan Vikas Patra of Govt. of India


These days, Indian post offices (small banks providing bank and mailing the letters services) are becoming the direct market for selling the guarantee bonds of Govt. of India. In these bonds, we can include kisan vikas patra. Govt. of India promises to customer that after 8 years 6 months, govt. will give the double amount to the holder, if he invests today in Kisan vikas patra. Still, govt. of India is paying 8.5% (approximate on the principle amount of KVPs) as interest.