Mentor’s comment-
- https://www.livemint.com/
opinion/online-views/indian- bond-trading-is-in-need-of- better-market-making- 11629389415171.html - In the intro, mention the lack of depth in the bond market as compared to the equity market.
- In the body, mention the issues with the bond that separates them from the shares of companies such as different coupon rates different maturity periods and different prices in changing interest rate environments. In the suggestion, mention supporting the market makers with incentives and creation of index etc.
- Conclude by mentioning the need to improve the bond markets to cater to the demand for credit/debt.
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Muskan
You have started well but second statement can be improved. Bonds are actually considered as one of the safer instruments, so mentioning risky won’t be correct. Instead you can mention that bond market is not well developed in India, liquidity is not enough and very little trading of bonds take place.
In issues with the bond market, 1st point is fine. 2nd point can be concise, question is not asking you to establish relation between interest rates and yields. Mention limited investor base and low liquidity in India unlike share markets. A majority of the bonds issued by companies are privately placed with a select set of investors in India rather than through a public issue. Most of these investors do not trade but hold these investments until maturity.
Way forward has been exclusively asked, mention 2-3 points, just saying technological development will not suffice. Mention that we need to create market-makers by giving them waivers and preferential access; Capital can be made available at a lower cost to market makers; need to have tradable-bond indices that reflect the price movements of a basket of bonds like sensex for shares etc.
Read more about the topic, content is lacking in this answer. Keep writing. 🙂