Types of Bonds

• Zero Coupon Bonds – Zero coupon bonds do not pay any interest. They are issued at a substantial discount to par value.  The bonds holder receives the full principal amount on the redemption date.
• G-Sec Bonds – Government Securities is a bonds where government is an issuer or borrower. It is the safest form of bonds as it is unlikely that the government defaults. Government issues bonds to raise money for funding infrastructure development, support subsidies or several other initiatives.
• Corporate Bonds – Corporate Bonds are issued by the corporates i.e. Public or Private companies to investors. The company borrows money from investors and promise to pay interest at regular intervals. The interest rates on such bonds are high compared to government bonds as the probability of government defaulting on interest payments is low compared to a corporate.
• Inflation Linked Bonds – In Inflation linked bonds; principal and the interest payments are indexed to inflation. The interest rate is usually lower than that of fixed rate bonds with a comparable maturity.
• Convertible Bonds – The holder of a convertible bonds has the choice to convert the bonds into equity (in the same value as of the bonds) of the issuing firm (borrowing firm) on pre-specified terms. This results in an automatic redemption of the bonds prior to maturity date.