Types of government securities and formation of the corporate bond market

The corporate bond market is a market-based tool for financing the economy. Traditional bonds of the state savings loan are not able to ensure the effective development of this segment of the national economy. At present, there are no single recipes that would lead to an early formation of an effective sphere of circulation of corporate bonds, they could completely replace, for example, bonds of an internal state currency loan or other assets in a market - based multistructured economy. However, there is already a sufficient number of empirical facts connected with the formation and development of national markets for corporate assets in various countries of the world.

Undoubtedly, numerous acts that exempt from taxation income on bonds of legal entities, as well as allowing to include costs of legal entities for the issue of bonds in the cost of production, can give an impetus to the formation of the sphere of circulation of corporate bonds in the country. In this paper, based on the theoretical generalization of empirical facts, as well as from the standpoint of observing the economic features of the market, the law of conservation of economic benefits is formulated in the primary market of corporate bonds, a model for the functioning of corporate bonds is developed.

Long-term analysis of interest rates in developed and emerging debt markets showed that, like all types of government securities, corporate securities in these markets occupy a niche, and their yield is within limits limited by the yields of alternative instruments.

All types of government securities limit the lower limit of the yield of corporate bonds, as they are the closest to the time structure of payments of the bond loan in terms of their time structure (terms of interest payment and maturity). It is important for an investor that all types of government securities have a yield lower than corporate bonds, at least by the value of the risk premium, so that it would be profitable for him to buy corporate rather than government bonds.

The upper limit of the yield of corporate bonds is determined by the interest rate on bank loans. When placing bonds, the issuer assumes the risk of non-placement of bonds on the terms offered by it, measured by yield. For the issuer, the value of the bond loan should be more attractive compared to the interest rate on bank loans, so that it would be beneficial for him to place the bond loan, rather than taking bank loans.

Acceptable for market participants is the level of corporate bond yield, when the issuer, in order to interest investors, offers a premium to the yield of state assets, but at the same time it takes at rates lower than the available sources of bank lending by the amount of DE. Therefore, in a functioning market, the yield of corporate bonds should be within these boundaries.

To meet the economic interests of all market participants, the yield of corporate bonds can not be lower than that available for all types of government securities, and the value of a bond loan can not be higher than the credit rate. In addition, the cost of the bond loan will always be higher than the yield of the corporate bond, since the bond loan is associated with additional costs for the issue, placement, circulation and redemption of corporate bonds. Finally, the profitability of the investor will be lower than the yield of the corporate bond by the amount associated with tax payments.