Fixed_Income_Instruments

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FIXED INCOME INSTRUMENTS:

FIXED INCOME INSTRUMENTS

SHORT TERM INSTRUMENTS:

CALL MONEY NOTICE MONEY TREASURY BILLS REPOS COMMERCIAL PAPER CERTIFICATE OF DEPOSITS SHORT TERM INSTRUMENTS

CALL MONEY:

Call money market is an inter-bank market Day to day surplus funds are either borrowed by or lent to banks Maturity of loans is 1 day to 14 days Repayable on demand at the option of either lender or borrower, i.e. on call Notice Money – Money lent for a period exceeding I day Liquidity is very high CALL MONEY

TREASURY BILLS:

Commonly referred to as T-Bills Represent obligations of the GOI Tenor: 14-days, 90-days, 182-days, 364-days Do not carry an explicit coupon rate Sold at a discount and redeemed at par Have no credit risk Have negligible price risk Banks and Primary Dealers (PDs) are main holders – as part of their SLR requirements TREASURY BILLS

REPOS:

Used as an abbreviation for Repurchase Agreement REPOS A 1) Requires short term funds 2) Does the Repo 3) Sells securities 4) Simultaneously agrees to repurchase the securities at a later date at a slightly higher price. 5) Difference between sale price and repurchase price represents interest cost to A B 1) Wants to make a short investment 2) Does the Reverse Repo Buys securities Difference between sale price and repurchase price represents i nterest income to B FUNDS SECURITY

COMMERCIAL PAPER:

Unsecured short-term instrument Issued by large corporates Sold at a discount and redeemed at par Interest rate will depend on overall short-term money market rates and credit standing of the issuer Individual investors can invest in CPs. Banks cannot accept CPs Usually has a maturity period of 90 – 180 days COMMERCIAL PAPER

CERTICATE OF DEPOSITS:

Short-term, transferable instrument Issued by banks and financial institutions Generally risk-free CDs carry an interest rate Banks, financial institutions, corporates and MFs are primary investors in CPs. Usually has a maturity period of 3 months to 1 year CERTICATE OF DEPOSITS

LONG TERM INSTRUMENTS:

GILT EDGED SECURITIES (G-Secs) PSU BONDS CORPORATE BONDS/DEBENTURES LONG TERM INSTRUMENTS

PPT By Aaryendr:

PPT By Aaryendr

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