Unifying bond markets will allow use of common infra: Sebi's Ajay Tyagi

 "Unification of government bond and corporate bond markets is an idea whose time has come," Tyagi said while speaking at CRISIL's 6th bond market seminar

Unification of government bond and corporate bond markets will enable the trading of such securities on the same platform, thereby utilising common infrastructure for trading, clearing, settlement and holding of securities, said Sebi chairman Ajay Tyagi.

"Unification of government bond and corporate bond markets is an idea whose time has come," Tyagi said while speaking at CRISIL's 6th bond market seminar.

He further added that this would lead to seamless transmission of pricing information between G-Secs and corporate bonds.

Corporate bonds, which are generally priced on the basis of G-Secs of comparable maturity, would therefore be priced more appropriately. The proposal would lead to economy of scope and scale, and increased liquidity for both G-Secs as well as corporate bonds and also facilitate greater participation by retail and non-institutional investors.

Tyagi, in his speech, laid out several other steps that are needed for further development of corporate bond market.

Emphasising on credit enhancement mechanism, he said the issuances by infrastructure projects do not typically fall in the category of top-rated corporate bonds.

Thus, a credible credit enhancement mechanism is required to improve the rating category of infrastructure special purpose vehicles (SPVs), which, in turn, would facilitate these SPVs to raise funds from the corporate bond market.

"This would be crucial to meet infrastructure financing targets as per the National Infrastructure Pipeline," he said. He also noted that expanding the investor base with preference for lower rated corporate bonds is required for further deepening of the corporate bond market.