What Are Public Debt Instruments And How Is The Buying And Selling On The Market?
Debt instruments come in many different forms some of which are government bonds, private sector bonds, commercial papers, bank bills, etc. The aim of the debt instruments market is to determine the prices the investors will invest in via security with the fixed interest in the competitive market environment and to be able to turn them into cash when wished. The debt instruments market in Turkey was established in the year 1991. When individual investors wish to operate in this market, they realize their commands per a competent bank.
Securities that are bought and sold by persons defined as qualified investors with minimum risk and usually under the guarantee of the government are called debt instruments. Governments and companies sometimes apply for these instruments in order to meet their capital and fund needs. By buying these debt instruments, investors give governments and companies practically a loan and get their money back with interest when are due.
While the investor puts his money into good use in a safe manner, the business or government meets his capital needs in procedures made with debt instruments. Especially investment processes made by government bonds also known as government debt securities brings the investor a steady and safe income. These are often preferred by investors who want to utilize their savings safely in a short or long term.
Capital market instruments that can be operated in the debt instruments market: debt instruments to be paid by Turkish Lira and foreign currency, debt instruments based on securitized assets and incomes, lease certificates, liquidity bills exported by the Central Bank of Turkey.
GOVERNMENT DEBT SECURITIES
These are debt instruments exported in the domestic market by the Undersecretariat of a treasury. The debtor is the government and those owning these debt instruments get their money at the end of the expiry date and coupon payment. Government debt securities can be bought and sold by persons and institutions in the secondary market. They can be categorized according to their exportation methods, the currency they are exported into, their interest payment method, the availability of a coupon etc. However, the most commonly used classification is according to their due date.
Government debt securities with an expiration date of one year and more are called government bonds and those shorter are called treasury bills. Government bonds and treasury bills are fixed income securities and bring their owner a certain profit with minimum risk.
PRIVATE SECTOR BONDS
Debt instruments exported by stock companies with a due date of one year and more are called private sector bonds. They can be determined freely provided that their due dates are minimum 1 year. Generally, they are put on the market by a consortium consisting of several intermediary firms. The investor buying the bond provides the company capital and this is called foreign capital. By this way, the company becomes indebted to the bondholder and has to pay for this debt until the due date. The investor, on the other side, cannot demand any other rights than the money of debt.
Debt instruments exporters regulate as debtor within the scope of the regulations of the Stock Exchange Commission, when they export with a reduced price with the aim of getting a short-term debt, are called commercial papers. Their dues cannot be longer than one year and are sold from the price determined by the exporter in accordance with the discount rates. The discount rates to be applied in accordance with the due are calculated yearly for commercial papers put on the market in order to offer them to the public.
These are securities exporters regulate as debtor within the scope of the regulations of the Stock Exchange Commission and export in order to procure capital. They are sold based on the discount principle and their rates are determined by export banks. Banking bills to be offered to the public cannot have a shorter due date than 60 days and longer than 1 year. The discount rates in accordance with the due date applied on the selling of the Banking bills put on the market on the condition of being offered to the public, are calculated on a yearly basis and are announced by the bank within the term of sale in the areas where the sale will be made.
LIQUIDITY BILLS OF THE CENTRAL BANK OF TURKEY
These are bills with the trait of securities which are a means of monetary policy issued by the Central Bank of Turkey in order to ensure the liquidity order on the market and to enhance the efficiency of open market operations. They are exported at a reduced price by the Central Bank of Turkey on its own behalf with dues not exceeding 91 days.
REVENUE SHARING CERTIFICATES
These are bills that make it possible for natural and legal persons to be a part of the incomes of bridges, power plants, dams, telecommunication systems etc. put on sale by the Treasury for the purpose of being transferred to the public participation fund belonging to state institutions and organizations. It concerns the incomes of infrastructure belonging to the public in the sectors of transportation, communication, and energy. The investor holding the revenue sharing certificate cannot make a claim on the property and communication of these facilities.
REVENUE INDEXED BONDS
Their export is realized by the Treasury for the purpose of enhancing domestic savings, diversifying revenue indexed bonds and enlarging the ground of investors. The incomes of revenue indexed bond exports are indexed on the revenue share transferred to the budget by the Turkish Petroleum Corporation, the State Supply Office, the State Airports administration and the Directorate General of Coastal Safety in the state of public economic enterprises.
ASSET AND MORTGAGE-BACKED GUARANTEED SECURITIES
Guaranteed security is a capital market instrument serving as a debt instrument exported by presenting guaranteed securities and are under the general obligation of the exporter. They are separated into two as asset guaranteed securities and mortgage-backed securities.
Those who are asset guaranteed are exported by presenting guaranteed securities by institutions like banks, mortgage financing institutions, leasing companies, factoring companies, and real estate investment trusts.
ASSET AND MORTGAGE-BACKED SECURITIES
Asset-backed securities are securities exported by presenting assets that the mortgage financing institutions or the asset finance fund will take over. The asset finance fund defines assets that have no legal personality and are established with the fund bylaws on the account of holders of debt instruments with money gathered from asset-backed securities.
Mortgage-backed securities, on the other hand, are securities exported by presenting assets to be taken over by residence financing funds and mortgage financing institutions.