When you invest in bonds, you can buy them in two main markets — the primary and the secondary market. In the primary bond market, companies or the government issue “new bonds” via a Bond IPO to raise money directly from investors. You subscribe to these new bonds at a set price and start earning interest once they are allotted to you.
Now, after these bonds are issued, they move to the secondary market. Here, you can buy and sell them anytime (just like trading shares). Be aware that both these markets are regulated by SEBI (Securities and Exchange Board of India) and offer a wide range of options across different risk levels, maturity periods, and coupon rates.
Want to gain more clarity? Read this article to understand the primary vs secondary bond market in detail and check out where and how investors can buy bonds in 2025.
What is a Primary Bond Market?
The primary market is the place where bonds are sold for the first time. It’s where a company or the government raises money directly from investors by issuing new bonds.
These bonds can be:
- Offered to the general public through a public issue
or
- Sold only to selected and qualified investors through a private placement.
Once the bonds are sold in the primary market, they start trading among investors in the secondary market. For more clarity, let’s check out some primary features of the primary bond market:
| Feature | Explanation |
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| Regulators |
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| Intermediaries |
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| Purpose for Issuers |
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How to Buy Bonds from the Primary Market?
When a company or the government decides to raise money from the general public, they announce a bond issue, also known as a Bond IPO (Initial Public Offering). The prospectus shares various details related to:
- Interest rate (coupon)
- Maturity period
- Issue size
- Application dates
Now, you, as an investor, can review the offer on the issuer’s or stock exchange’s website and apply either through:
- Your demat account (via brokers)
or
- Banks or investment advisors authorised to distribute the bond
You must fill in the application form, select the quantity, and make the payment before the issue closes. Be aware that in the primary market, you pay the issue price decided by the issuer.
Allotment of Bonds
Lastly, after the issue closes, the issuer reviews all applications. If demand is high, partial allotment may occur on a “pro rata” basis. Now, once allotted, bonds are credited to your demat account. In case bonds are not allotted, your money is refunded.
After allotment, you become the bondholder and start earning interest (coupon payments).
Later, you can sell these bonds in the secondary market through the exchange or hold them until maturity to receive the principal amount back.
What is the Secondary Bond Market?
The secondary bond market is the place where investors buy and sell bonds that have already been issued in the primary market. It gives investors liquidity as they can sell their bonds whenever they need cash (instead of waiting until maturity).
Be aware that the prices of bonds in the secondary market change based on various factors, such as:
- Interest rates
- Economic conditions
- Issuer’s credit rating
- Issuer’s financial position or creditworthiness
In this way, the secondary market allows investors to manage their bond portfolios + check out the real market value of their holdings.
Primary vs. Secondary Bond Market: Check Out the Latest Differences 2025!
Till now, you must have understood that the primary and secondary markets function differently. In the primary market, you can buy new bonds directly from the issuer.
Comparatively, in the secondary market, you can buy or sell bonds that already exist. Here, bond prices keep changing. If you buy when prices are low or sell when they rise, you may also earn extra profit (capital gain) besides the interest.
To further your understanding, the table below shows the primary differences between the primary and secondary bond markets:
| Aspect | Primary Bond Market | Secondary Bond Market |
|---|---|---|
| Meaning |
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| Also Called |
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| Who You Buy From |
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| Price |
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| Trading Frequency |
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| Where the Money Goes |
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| Interest and Returns |
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In Summary, the Primary vs. Secondary Bond Markets Are Two Ways To Invest in Debt Instruments!
So now you know that the primary market is where bonds are created and sold for the first time by companies or the government to raise money. The secondary market, on the other hand, is where these bonds are traded among investors after the initial sale.
Both markets serve different purposes, but together form the backbone of the Indian bond market. Some major differences between primary vs secondary bond markets are:
- Bonds are issued vs. traded
- Prices are fixed by the issuer vs. market-driven
- Funds go to the issuer vs. the investor
- One-time sale vs. continuous trading
If you are searching for bond options in the secondary market, you may visit the GoldenPi platform. Here you can find out multiple bond issuers with important details like yield, coupon rate, and maturity date. Also, you can instantly invest online without any branch visits!
Primary vs. Secondary Bonds Market FAQs
What is the main difference between primary and secondary bond markets?
In the primary market, new bonds are created and sold for the first time. In contrast, the secondary market is where they are bought and sold after issuance.
What role does SEBI play in the primary and secondary markets?
SEBI regulates both markets to keep them fair and transparent. In the primary market, it monitors the issue of new securities and ensures legal compliance. In the secondary market, SEBI oversees brokers, exchanges, and trading practices to maintain investor confidence + market integrity.
What do ‘par,’ ‘premium,’ and ‘discount’ mean in the bond market?
All three (par, premium, and discount) represent the different price levels at which a bond can trade in the secondary market.
“At par” means the bond is issued at its face value. In contrast, “at premium” represents the price is higher than the face value, and “at discount” means the price is lower than the face value.
Will my interest income decrease if the bond price falls in the secondary market?
No, your interest income remains unchanged. The bond’s coupon rate is fixed when it’s issued, so you’ll keep earning the same interest until maturity.
Can I decide my own price when buying bonds from the primary market?
No, the bond price in the primary market is set by the issuer and mentioned in the offer document. Investors can only apply at that fixed price. Be aware that price negotiation happens only in the secondary market, after bonds are issued.
Disclaimer:
This information is for general information purposes only. GoldenPi makes no guarantee on the accuracy of the data provided here; the information displayed is subject to change and is provided on an as-is basis. Nothing contained herein is intended to or shall be deemed to be investment advice, implied or otherwise. Investments in the securities market are subject to market risks. Read all the offer-related documents carefully before investing.
Bonds or non-convertible debentures (NCDs) are regulated by the Securities and Exchange Board of India and other government authorities. GoldenPi Securities Private Limited is a registered debt broker and acts as a distributor and not as a manufacturer of the product.
