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Primary and Secondary Bond Market 

Writer # Indiabonds | February 22, 2023

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In the financial ecosystem, new and various types of financial instruments are regularly issued to the public to suit their individual needs. When it comes to equity investing, one can buy and sell equities in primary and secondary market. The primary market is where securities are first issued, after which they are exchanged on the secondary market.

Bond markets are where investors can buy and sell various forms of debt securities, such as G-secs and debentures. This market, similar to equity, is also divided into two categories: primary and secondary bond market.

What is the primary and secondary bond market?

Primary markets mean that market which allows sale of newly issued bonds. Newly issued bonds can be registered with the regulators for sale to the public (public offering) or sold only to qualified investors (private placement). Bonds are issued to the public for the first time in primary markets. However, secondary markets facilitate the trading of previously issued bonds. In simple words, primary market refers to the market where debt instruments are created, and the secondary market is the marketplace where investors trade these instruments.

Features of Primary Market:

The debt primary market is where new debt securities are issued and sold to investors for the first time. In this market, the issuer of the debt security raises capital by issuing bonds, notes or other debt instruments. The investors receive an obligation of the issuer that the debt will be repaid, as well as a promise of interest payments over a predetermined time period-in exchange for the issuer receiving the money collected through the sale of the debt instruments.

Some of the key features of this market include:

  • Regulated by the Reserve Bank of India (RBI) for government bonds and the Securities and Exchange Board of India (SEBI) for corporate bonds.
  • Debt instruments are issued to the general public through public offerings or to a select group of investors through private placements.
  • The market is highly organized with various intermediaries such as investment bankers, registrar, transfer agents and credit rating agencies playing a crucial role.
  • The market provides an alternate source of funding for the issuers, besides equity and bank loans.
  • The primary debt market in India is well-developed, with a range of debt instruments catering to different investor segments, tenors, and credit profiles.

Features of Secondary Market:

The debt secondary market is where existing debt securities are bought and sold after they have been issued in the primary market. In the secondary market, investors can buy and sell debt securities, such as bonds and notes, without the involvement of the original issuer. The secondary market provides liquidity to investors, allowing them to buy and sell their holdings as needed, while also helping to determine the fair value of the securities based on supply and demand.

The secondary debt market in India refers to the market where existing debt instruments, such as G-Secs and NCDs, are bought and sold among investors. Some of the key features of this market include:

  • Regulated by the Reserve Bank of India (RBI) for government bonds and the Securities and Exchange Board of India (SEBI) for corporate bonds.
  • The market is highly organized with intermediaries such as stock exchanges, brokers, dealers and online bond platforms like IndiaBonds playing a crucial role.
  • Debt instruments are traded on stock exchanges and over-the-counter (OTC) markets.
  • The market provides liquidity to investors by allowing them to sell their debt instruments before maturity.
  • The market provides investment opportunities to a wide range of investors, including individuals, institutional investors and foreign investors.

Difference between Primary and Secondary Bond Market:

  • The primary market is where debt securities are issued, while the secondary market is where those securities are traded by investors.
  • The primary market is also known as a new issue market and the secondary market is known as an ‘after issue market.’
  • Prices in the secondary market fluctuate according to supply and demand for the debt securities sold. However, the primary market’s prices are set.
  • In the primary market, investors have the option to purchase the debt securities directly from the company, whereas in the secondary market, the investors buy and sell the securities among themselves.
  • The debt securities in the primary market can only be sold once, while in the secondary market sale and purchase is a continuous process.
  • The amount received in the primary market goes directly to the issuer, whereas any profit made from the secondary becomes the income of the investors and traders.
  • Coupon and yield remains the same in primary market whereas the yield differs as the price keeps fluctuating.


In conclusion, the debt market in India has been growing at a steady pace in recent years. The market offers a wide range of investment options for both retail and institutional investors and has been attracting a growing number of participants. The Indian government has been actively promoting the development of the debt market by implementing various reforms and initiatives to increase its depth and liquidity. The market has remained resilient, and experts believe that it will continue to grow in the coming years.


What is the Bond Market?

The bond market is a financial market where participants can buy and sell debt securities, usually in the form of bonds. A bond is a type of investment that represents a loan made by an investor to an issuer, such as a corporation or government. The issuer promises to repay the loan on a specified date and to pay periodic interest payments to the bondholder at a fixed rate.

Are Bonds a Good Investment?

Whether bonds are a good investment depends on a number of factors, including an individual’s investment goals, risk tolerance and the current economic and market conditions. In general, bonds can provide a more stable and predictable source of income compared to stocks. They offer a fixed rate of return, which can be attractive to investors seeking a reliable source of income. Additionally, bonds tend to be less volatile than stocks and can provide diversification benefits to a portfolio that includes both stocks and bonds.

Are Bonds a Secure Investment?

It’s important to keep in mind that no investment is completely secure, and the value of bonds can decline as well as rise. Before investing in bonds, it’s important to carefully consider the creditworthiness of the issuer, the terms of the bond and the overall economic market conditions. Seeking the advice of a financial advisor can also be helpful in making informed investment decisions.