What is Bond?
A bond is a fixed income instrument in which investor loans money to an entity (Corporate or Government) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by Corporate or Government to raise money and finance a variety of projects or activities.
What is the Bond Market?
It is a market meant for trading (i.e. buying or selling) fixed income instruments. Fixed income instruments could be securities issued by Central and State Governments, Municipal Corporations, Govt. Bodies or by Private entities like Financial institutions, Banks, Corporate, etc.
Basic components of Bond
It refers to the Rate of Interest payable by the issuer to the investor on periodic basis.
Face value of the bond is determined by the issuer at the time of issue. It may be as low as Rs.100 or as high as Rs.10 lakhs per bond.
It refers to the date on which the bond matures, or the date on which the borrower has agreed to repay the principal amount to the lender or bond holder.
The price arrived at without adjusting the accrued interest component is called Clean price. In secondary bond market majority deals concluded on clean price.
The price arrived at after adjusting accrued interest component is called Dirty price. (e.g.: Clean Price + Accrued Interest)
YTM (Yield To Maturity)
The rate of return that an investor would earn if an investor buys the bond at current price & held it until maturity.
A call option provides issuer the right to redeem a bond before its maturity date i.e on Call date. Whereas a put option provides investor the right to give back bond to issuer before its maturity date i.e. on Put date.
YTC/YTP (Yield To Call/Put)
The rate of return that an investor would earn if an investor buys a Callable/Puttable bond at current market price & hold it until the Call/Put date.
Perpetual bond is a bond with no fixed maturity date. Typically these bonds are issued with call option to be exercised by issuer on call date.
If call option not get exercised on call date, at defined interval and terms issuer can call back security. Yields of perpetual bonds are therefore calculated considering the call date.
If a coupon bearing security is traded between two coupon dates, the buyer has to compensate the seller by paying him that part of the interest which is due to him for the period for which he has held the security after the immediately preceding coupon date.
To, understand this let us assume A customer would like to buy 8.92% PFC 2033 bond in the secondary market and Deal execution/Settlement date is fixed as 14th Sep 2018.
Interest payment date of this security is 16th November every year. So, last interest was paid on 16th Nov 2017. No of days’ calculation between Settlement date and last interest payment date would be as below
|LAST INTEREST DATE||16/Nov/17|
|NO. OF DAYS||302|
Interest for the intervening period of 302 days will need to be paid by the buyer to the seller. Because interest payable by the company to the new holder will be for 365 days.
Calculation of accrued interest for 302 days = Rs.8.92 / 365 * 302 = Rs.7.38.
- Investors with tax status Resident Individual, HUF, Minor, Partnership Firm, LLP and Company can buy Bonds online on FundzBazar.
- Applicant must be a Resident of India.
- First holder should be the investor in whose name bonds are intended to be purchased.
- First holder must have a Demat account.
Yes, demat account is mandatory for first holder to buy bonds.
Any one of these are valid document, preferably not older than 6 months.
Client Master, Demat Holding statement OR DP Transaction Report covering all details of Demat a/c.
FundzBazar team will verify the uploaded Demat proof. It may take one working day to verify the same.
FundzBazar team will send intimation mail post verification.
Yes, you can add multiple demat accounts for each investor. In case of multiple holding pattern, first holder should be the investor in whose name bonds are intended to purchase.
Yes, we have given the option to the investor to choose the demat account in which they want delivery of the bonds purchased through FundzBazar platform.
Yes, you can select multiple securities at a time of purchase.
You will get the coupon rate based on the interest frequency fixed by the issuer of the bond.
Interest amount will be credited to the bank account which is linked to your demat account
No, there is no option available to choose the interest frequency. You will only get the option which is mentioned on the bond selection page.
No, there is no lock in period on any of the bonds available under secondary deal.
If you hold the bond till maturity, you will get the Face Value of the bond
- Deal working is on the basis of T+1 for calculation of Accrued Interest & Settlement Date where, T = Working Transaction Day and T + 1 = Next Working day after T day.
- Bond/s will be transferred to investors demat account on the next working day after receipt of clear balance in our bank a/c.
You can execute bond transaction through 3 different payment modes:
- Net banking
- NACH mandate
No, you have to execute only one NEFT/RTGS of Total settlement amount for purchasing multiple bonds under one reference ID
If you fail to execute NEFT/RTGS within time, deal will stand cancel and you have to execute purchase transaction again.
No, you cannot execute NEFT/RTGS from any other bank account of same bank which is not linked with your FundzBazar account.
If you execute NEFT/RTGS from other bank account which is not linked with FundzBazar, bond deal will stand canceled and total settlement amount will be credited to your bank account within 2 working days after receipt of clear balance in our bank a/c.
If figure mismatch of total settlement amount & NEFT/RTGS amount, deal will stand canceled and total settlement amount will credited to your bank account by the end of next working day.
We will transfer security within next working day after receipt of clear balance in our bank account.
It is Deal confirmation from seller to the buyer for securities/bonds he has bought Online. It covers all details of deal like security, price, settlement date and demat details etc.
We will send signed copy on Registered Email id of buyer/investor for all successful deal. Buyer/Investor should save copy of same for his accounts purpose.