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Bonds - Innovations in the Bond market
11-Apr-2003
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Bond is a loan given by the buyer to the issuer of the instrument. Bonds can be issued by companies, financial institutions, or even the government. Over and above the scheduled interest payments as and when applicable, the holder of a bond is entitled to receive the par value of the instrument at the specified maturity date.

The development of the bond market has brought about new innovations and features which are meant to meet the investor's demand.

Municipal Bonds:

One of the new varieties of bonds which has come up recently is the Municipal offers initiated by the Ahmedabad Municipal Corporation. The similar bond offers from Bangalore Municipal Corporation, Hyderabad Municipal Corporation and Pune Municipal Corporation are expected to hit the market in the coming months.

Infrastructure Bonds:

India requires huge investment in coming years to build much required infrastructure. Indian Government has accorded this sector high priority status. World over infrastructure sector is funded by bonds. Following the same trend Indian Financial Institutions like HUDCO, ICICI, IDBI etc. have issued infrastructure sector specific bonds. Investment in these bonds, besides supporting development of infrastructure projects, is also eligible for tax relief under sections 54EA, 54EB and 88 of Income Tax Act.

Gilt:

A new era has recently opened for the small investor. This segment is government bonds or gilt edge securities. They are now available for public subscription. In the first serious thrust to create a retail base for gilts six primary dealers have started selling these government bonds. Gilts offers the highest safety and good liquidity.

Newer varieties of bonds have come up like:

  • Inflation Index Bonds
  • In-Cash Bonds
  • Stepped-Up Bonds
  • Deep-Discount Bonds
  • Tax-saving Bonds
  • Call-linked Bonds.
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