Corporate bonds


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Corporate bonds

Corporate Bond

Debt securities issued by a for-profit company instead of a government. Corporate bonds are a major way companies raise funds for their operations or for a specific project. The risk of a corporate bond for a bondholder depends on the creditworthiness of the issuing company. As with all bonds, corporate bonds have a maturity, at which time the principal is repaid to bondholders. They also usually have a stated coupon rate. Corporate bonds are taxable.
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Unlike the first corporate bonds, LOLC's offer investors not only fixed-coupon bonds but also those indexed to foreign exchange rates, with an interest rate that varies according to foreign currency exchange rates.
The monitor also noted the outstanding LCY corporate bonds of the top 30 issuers amounted to P1.14 trillion by end of December, and this made up 86.9 percent of the entire LCY corporate bond market.
The last corporate bond was a Sh6 billion paper issued by East African Breweries (EABL) in April 2017 and there have been more redemptions of the fixed income securities than new offerings.
Terming the corporate bond segment as a "good story" in the last two years, Tyagi said in 2016-17, Rs 6.7 lakh crore was invested in corporate bonds, a figure that would likely be surpassed in the ongoing fiscal.
Deleveraging efforts in China are often cited as another key potential risk, particularly for Asian corporate bonds. Measures of aggregate levels of debt do indeed appear high - China's debt as a ratio of GDP has risen from just over 160 per cent in 2007 to almost 260 per cent in 2016.
"With interest in the fixed-income markets and market design on the rise, the Academic Corporate Bond TRACE Data provides researchers with broad content to investigate issues of interest to market participants and regulators including liquidity provision, search costs, inventory models, price discovery and the treatment of retail orders," Jonathan S.
While the financial services sector remained the primary driver of corporate bond issuance - consistent with the trend of the last two years - other sectors such as infrastructure and utilities have also posted commendable issuance volume.
China is already witnessing a spate of downgrades and default of corporate bonds. The largest credit rating agency in India, CRISIL, has recently pegged the aggregate downgraded debt in the domestic market at Rs 3.8 lakh crore.
The legislative environment for bonds requires amendments to make trading on government bonds available for individuals directly through brokerage firms, which means attracting investors to the bond market in general and specifically corporate bonds.
The most notable shift is from the National Association of Insurance Commissioners' NAIC 1 investment-grade category (AAA- to A-rated corporate bonds) to the NAIC 2 category ('BBB').
Government securities accounted for the majority of bonds outstanding, totaling P3.85 trillion, while corporate bonds hit P749 billion, data from the ADB showed.

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