Before invest Know about all keywords in Bond Market

Introduction

Bond markets have their own language. Prospectuses, broker screens, rating reports, and news headlines throw dozens of terms at you in a single page — coupon, YTM, callable, SDL, accrued interest, clean price. If you invest without understanding that vocabulary, you may compare the wrong numbers, miss hidden risks, or buy a product that does not match your timeline.

This article is a structured glossary for India-focused retail investors. It does not replace due diligence or professional advice, but it gives you a map: what each keyword means, why it matters, and where it usually appears. Read it before you invest, keep the FinCoHolic Bond investment guide open for checklists and FAQs, and revisit sections when you encounter unfamiliar jargon in an offer document.

Parties, documents, and identifiers

Issuer — The entity borrowing money by issuing the bond (central government, state government, PSU, bank, NBFC, or private company). Your return depends on the issuer’s ability to pay coupons and repay principal.

Bondholder / debenture holder — The investor who owns the bond and receives contractual payments. In India, corporate debt is often called a debenture or NCD (non-convertible debenture) when it cannot convert into equity.

Trustee — An independent party (often a bank or trustee company) that monitors covenant compliance on behalf of bondholders in many corporate issues.

Indenture / offer document — The legal document listing coupon, maturity, security, call/put options, and covenants. Always read the summary of terms before subscribing.

ISIN (International Securities Identification Number) — A unique 12-character code for each listed/traded security in India (e.g. INE…). You need the ISIN to buy or sell in demat form.

Demat account — Electronic holding of bonds, like shares. Most retail bond platforms require demat for secondary market trades.

Lot size / minimum investment — Smallest tradable or subscribable unit (often ₹1,000 face value per unit on platforms, but offers may require higher minimums).

Principal, coupons, and dates

Face value (par value / nominal value) — The amount the issuer promises to repay at maturity per unit (commonly ₹1,000 or ₹10,000 in India). Coupons are usually calculated on face value, not on what you paid in the market.

Coupon rate — Stated annual interest as a percentage of face value. A 8% coupon on ₹1,000 face pays ₹80 per year, often in two semi-annual instalments of ₹40.

Coupon payment frequency — How often interest is paid: annual, semi-annual, quarterly, or monthly. Frequency affects cash-flow planning and accrued-interest calculations.

Principal / redemption amount — Money returned at maturity (typically face value unless partial amortisation or default).

Maturity date / tenor — When the bond ends and principal is due. Tenor is the remaining life (e.g. 3-year, 10-year). Match tenor to your goal horizon.

Issue date / allotment date — When the bond is created or allotted to you after a primary issue.

Record date — Cut-off date to be on the register to receive the next coupon. If you buy after this date, the seller keeps accrued interest; you still get future coupons.

Ex-interest date — First day the bond trades without the upcoming coupon attached. Buying on or after ex-date means the seller received the accrued interest component in the price.

Accrued interest — Interest earned but not yet paid since the last coupon date. In secondary trades, buyers often pay accrued interest on top of clean price (see Price terms below).

Yield and return keywords

Coupon yield (nominal yield) — Annual coupon divided by face value. It ignores whether you bought at a discount or premium and ignores reinvestment — useful but incomplete.

Current yield — Annual coupon divided by current market price. Shows income relative to today’s price, not total return if held to maturity.

Yield to maturity (YTM) — The single most important retail metric for plain vanilla bonds: the annualised return if you hold to maturity, assuming coupons are reinvested at the same rate and the issuer does not default. YTM accounts for price paid, all coupons, and time to maturity.

Yield to call (YTC) — Return if the issuer calls (redeems early) the bond on the first call date. Critical for callable bonds where headline YTM can overstate reality.

Yield to put (YTP) — Return if you exercise a put option and sell back to the issuer on the put date.

Running yield — Similar to current yield; sometimes used interchangeably in broker quotes.

Spread / credit spread — Extra yield above a benchmark (often a G-Sec of similar maturity) that compensates for issuer risk. Wider spread usually means higher perceived risk.

Benchmark yield — Reference rate from a government bond curve used to price corporate and SDL paper. When benchmark yields rise, existing bond prices typically fall.

Price, interest-rate sensitivity, and trading quotes

Market price / traded price — What buyers pay today, which may be above or below face value depending on interest rates, credit view, and liquidity.

Premium — Price above face value (common when coupon is higher than current market rates).

Discount — Price below face value (common when coupon is lower than current rates).

Clean price — Quoted bond price excluding accrued interest. Most professional screens show clean price.

Dirty price (full price) — Clean price plus accrued interest; what you actually pay in many secondary settlements.

Bid price / ask price — Bid is what dealers pay you; ask is what they sell for. The gap is the bid-ask spread — a hidden cost in illiquid names.

Duration — Measures sensitivity of bond price to interest-rate changes (approximate). Higher duration = larger price swing when yields move.

Modified duration — Duration adjusted for yield; often used to estimate price change for a 1% yield move.

Convexity — Refines duration’s estimate for large rate moves; positive convexity helps long-only holders when rates fall sharply.

Interest rate risk — Risk that rising market yields push bond prices down before maturity. Longer tenor and lower coupon bonds usually have higher interest rate risk.

Mark-to-market (MTM) — Valuing your holding at current market price rather than face value. Unrealised gains/losses appear even if coupons are paid on schedule.

Credit quality and default-related terms

Credit rating — Opinion from a rating agency on issuer’s ability to pay debt. In India, major agencies include CRISIL, ICRA, CARE Ratings, and India Ratings. Ratings are not guarantees — they can be downgraded.

Investment grade — Higher-quality ratings (typically AAA to BBB band in global scales; Indian agencies use similar symbols — check the agency scale). Lower default probability than speculative grade, not zero risk.

Speculative grade / high yield / junk — Lower ratings where default risk is materially higher; coupons may look attractive but capital loss risk is real.

Rating outlook (stable / positive / negative) — Directional view on whether a rating may change.

Default — Issuer fails to pay coupon or principal on time. Recovery may be partial through resolution or liquidation.

Recovery rate — Percentage of face value bondholders may recover after default.

Secured bond — Backed by specific assets (mortgage, receivables, charge on property). Secured holders generally rank ahead of unsecured in bankruptcy.

Unsecured bond / NCD — Not backed by specific collateral; relies on issuer’s general creditworthiness.

Subordinated debt — Ranks below senior debt in payout order; higher yield compensates for higher loss severity in stress.

Credit risk / issuer risk — Risk the borrower cannot pay. Diversify across issuers and avoid concentration in single weak names.

Liquidity risk — Risk you cannot sell quickly at a fair price. Many corporate bonds in India trade thinly in secondary markets.

Bond structures and product types

Fixed-rate bond — Coupon stays constant for life; simple to understand; price moves with market yields.

Floating-rate bond (FRB) — Coupon resets periodically with a benchmark (repo, MIBOR, G-Sec yield). Helps when rates are rising but cash flows are less predictable.

Zero-coupon bond — No periodic coupon; issued or bought at a discount; return comes entirely from maturity redemption. High duration for long-dated zeros.

Callable bond — Issuer can redeem before maturity on call dates — good for issuer when rates fall; reinvestment risk for investor.

Puttable bond — Investor can sell back to issuer on specified dates — adds flexibility but may trade at lower yield.

Convertible bond — Can convert into equity under defined terms; hybrid of debt and optionality.

Perpetual bond / AT1 (Additional Tier 1) — No fixed maturity; common in bank capital structures; higher loss-absorption features — not typical retail products.

Inflation-linked bond — Principal or coupons adjust with inflation index.

Tax-free bond — Certain municipal or government-linked issues where interest may be exempt from income tax for qualifying investors — verify current tax law.

Green / social / sustainability bond — Proceeds earmarked for environmental or social projects; check reporting standards and whether label matches your values.

Amortising bond — Repays part of principal periodically instead of one bullet at maturity.

India issuers and instrument names

G-Sec (Government Security) — Sovereign bond issued by the Government of India; considered the domestic risk-free benchmark in rupees.

T-Bill (Treasury Bill) — Short-term zero-coupon government instrument (up to one year); not a coupon bond but part of the government debt market.

SDL (State Development Loan) — State government bond; slightly higher yield than comparable G-Sec; state-specific credit considerations.

PSU bond — Issued by public sector undertakings; quasi-sovereign perception but not full sovereign guarantee unless explicitly stated.

Corporate bond / NCD — Company-issued debt; yield and risk vary widely by sector and balance sheet.

Municipal bond — Local body infrastructure funding; may offer tax advantages in some structures.

Sovereign Gold Bond (SGB) — RBI-issued, gold-linked instrument with sovereign backing and distinct tax rules — related to gold exposure, not a classic fixed coupon corporate bond.

RBI Floating Rate Savings Bond — Retail government-linked product with floating coupon tied to NSC rates — check current RBI notifications for terms.

Bank FD vs bond — Fixed deposits are bank liabilities with DICGC insurance limits; bonds are securities with market price risk and different legal ranking — do not treat them as identical.

Markets, regulation, and platforms (India)

Primary market — New issue where you subscribe directly (IPO-style bond issue, private placement to qualified investors, or retail tranches on platforms).

Secondary market — Trading among investors after issue; prices move with rates and credit. Liquidity varies sharply by ISIN.

OTC (over-the-counter) — Most corporate bond trading in India happens dealer-to-dealer or via platforms outside a central order book.

Exchange-traded (NSE/BSE debt segment) — Some bonds list and trade on exchanges; still check liquidity and settlement mode.

CCIL (Clearing Corporation of India Limited) — Clears and settles many G-Sec and SDL trades; important infrastructure in the government bond market.

SEBI — Regulates securities markets including corporate bonds, NCD public issues, and Online Bond Platform Providers (OBPPs).

RBI — Regulates government securities market, money market, and certain retail RBI products.

OBPP (Online Bond Platform Provider) — SEBI-registered platforms that facilitate bond discovery and execution for investors (e.g. IndiaBonds, GoldenPi — also linked from FinCoHolic footer as educational referrals, not endorsements).

KYC — Know Your Customer verification required before trading or investing through regulated channels.

T+1 settlement — Standard settlement cycle (trade date plus one business day) for many securities — know when money leaves and bonds credit.

Private placement vs public issue — Private placements target select investors with lighter disclosure; public issues have broader retail access and SEBI filing requirements.

Portfolio and strategy terms

Asset allocation — Share of your portfolio in debt vs equity vs cash. Bonds usually reduce volatility relative to equities but are not risk-free.

Laddering — Holding bonds with staggered maturities so money returns at intervals and can be reinvested at prevailing rates.

Barbell strategy — Mix of short-maturity and long-maturity bonds with less in the middle; balances liquidity and duration exposure.

Bullet strategy — Concentrating maturity around a specific date to match a known future expense.

Duration matching / liability matching — Aligning bond cash flows to future payments (school fees, retirement drawdown) to reduce timing mismatch.

Reinvestment risk — Risk that coupons or maturing principal must be reinvested at lower rates — especially relevant when rates are falling and for callable bonds.

Inflation risk — Fixed coupons lose purchasing power if inflation runs above your real return.

Concentration risk — Too much exposure to one issuer, sector, or rating bucket.

Total return — Coupon income plus price change (capital gain or loss) over a period; what you actually experience if you sell before maturity.

Hold-to-maturity vs trading — Long-term holders focus on YTM and credit quality; traders focus on spread moves and rate direction. Know which you are before you buy.

Before you invest — how to use this glossary

When you evaluate any bond, run the keywords in order: Who is the issuer? What is the coupon, face value, and maturity? Is it callable or puttable? What is the credit rating and outlook? What YTM (or YTC if callable) are you actually earning at today’s price? Is the bond liquid enough to exit if plans change? What are clean price, accrued interest, and settlement date?

Cross-check terms against FinCoHolic’s before-you-invest checklist on the Bond investment guide and read the offer document for anything not covered here. If two products show similar coupons but very different YTMs, the difference is usually hiding in price, credit, call features, or liquidity — not in magic.

This article is educational only. It is not investment, tax, or legal advice. Bond terms in live offers may differ; verify with official documents and qualified professionals before investing.