2. A) Supply the prepositions where necessary.

b) Say what you have learnt about the debt market in India.

The door is slowly opening on India’s debt markets. Foreign investors can now invest 100% of their Indian portfolios in corporate debt as against the 30% allowed previously. He market itself is booming. … long-term debt worth Rs55 billion ($1.54 billion) raised by Indian corporates in the past few months and fixed-income returns overtaking those of equities, the market is ripe … reform.

The driving force … India’s debt market reforms is the need to raise capital … infrastructure projects. India needs .. about $300 billion … the next 10 years for infrastructure alone. Only half of this can be raised from the commercial banks, the equity market, the government and multilateral agencies like the World Bank. The other half must come from its domestic debt markets. But the Indian debt market is too small to meet this requirement at the moment.

So the market is moving ... the right direction and bonds – not shares – are the hottest selling investments in India today. In the past, equity markets overshadowed debt markets … both size and returns. While India’s total stock market capitalization is still equal … $138.6 billion, analysts say that investors are increasingly choosing bonds … equity. Of the total Rs16.74 billion was raised in debt floats. Returns … debt are also higher than from equity.

In spite of the government’s efforts, two major obstacles remain. The government bond market is still closed … investment banks. The other problem is liquidity.

Besides, secondary market trading in debt is limited … government securities and is done mainly on the wholesale debt market of the National Stock Exchange. Allowing market-making in government securities is the key … creating an active secondary debt market in India.

Having this mind the Reserve Bank of India – the Indian central bank – set … a system of primary dealers or makers in government securities. But for debt trading to be successful, several structural changes need to be put in place, including setting up a depository and establishing a REPO market.

Words you may need:

corporate debt – облігації, що випущені корпорацією

The market … is booming – На ринку ... спостерігається підвищення ділової активності.

fixed-income return – дохід по паперам з фіксованим прибутком

overtake – випереджати

ripe – готовий до чогось

overshadow – затьмарювати

capitalization – капіталізація

debt float – випуск боргових зобов’язань

primary dealer – первинний дилер

depository – депозитарій

REPO market – ринок РЕПО

3. A) Read the text.

b) Discuss the reasons which led to the creation of the UK debt market and its structural changes in the late 80s.

The UK Government bond market is generally the market of giltedged securities. These securities are considered to be very safe.

The market origins go back to 1694 when the Bank of England was founded to help the Government raise money to fight the French . borrowing to fiancé wars has been common and the outstanding amount of debt has soared during all of the major wars since then. The major expansion, however, came in the post-World War II period, especially in the 1970s and early 1980s. historically, the market developed with a strict separation between brokers and jobbers. The brokers did business with the public, but the jobbers did business only with brokers, and with each other.

On 27 October 1986 the market was structurally reorganized. As a result of the “Big Bang” the market switched to a new trading system, modeled on the US bond market. The essential change in this market was that a structure with separate jobbers and brokers was replaced with a structure with gilt-edged makers (GEMMs) who deal directly with large customers.

The gilt-edged markets constitute the major proportion of money passing through the Stock Exchange. Transactions are typically much larger than in the equity market.

UK gilts consists of two distinct markets, the short gilts market (securities with five years or less to maturity) and the market for medium and long gilts.

Some time in the past here were forecast that the gilt market would disappear by the end of the century. The Big Bang reforms succeeded in achieving one of the key objectives – to make the market accessible and attractive to international investors. There has been an increasing trend towards investors moving funds between the major bond markets, taking views on both the bonds themselves and the currencies involved. Now, in its current form it is firmly in the mainstream as one of the world’s most actively bond markets.

As to the UK corporate bond market, it has had a mixed history. Historically, it has been a major source of corporate funds but issuance virtually stopped during the 1970s and early 1980s due to high inflation and large government issuance.

In the last few years, the market has sprung to life again, helped by the fall in long-bond yields due to inflation fall and temporary disappearance of the government’s borrowing requirements.