PRIVATE SECTOR/CORPORATE BONDS

Corporate Bonds are issued by public sector undertakings and private corporations for a wide range of tenors but normally up to 15 years. However, some Banks and Companies like Reliance have also issued Perpetual Bonds.

Compared to government bonds, corporate bonds generally have a higher risk of default. This risk depends, of course, upon the particular corporation issuing the bond, its rating, the current market conditions and the sector in which the Company is operating. Corporate bond holders are compensated for this risk by receiving a higher yield than government bonds. Some corporate bonds have an embedded call option that allows the issuer to redeem the debt before its maturity date. Some even carry a put-option for the benefit of the investors. Other bonds, known as convertible bonds, allow investors to convert the bond into equity.