1 / 11

Bond Markets: An Introduction

Bond Markets: An Introduction. Kiran Pendri 20 January 2006. Basics. Bonds are a type of fixed-income security Governments and corporations need to borrow Stocks v. Bonds (Debt v. Equity) Risk v. Return. Definitions.

zeal
Download Presentation

Bond Markets: An Introduction

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Bond Markets:An Introduction Kiran Pendri 20 January 2006

  2. Basics • Bonds are a type of fixed-income security • Governments and corporations need to borrow • Stocks v. Bonds (Debt v. Equity) • Risk v. Return

  3. Definitions • Par Value (also known as Face Value or Principal – amount paid upon maturity • Coupon – interest rate per year, as a percentage of par value (fixed or floating-rate bonds are possible) • Maturity date – date of repayment of principal • Issuer – party who sells the bonds originally to borrow money

  4. Risks of Disparate Issuers • Default risk must be evaluated for different governments and corporations (and other issuing parties) • The U.S. Government is the gold-standard of bonds – its bonds carry no default risk • Blue chip firms are the gold-standard of corporate bonds • Credit Rating Agencies provide risk assessments

  5. AAA vs. Junk Spreads

  6. Corporate vs. Government Spreads • http://online.wsj.com/page/2_0520.html • http://online.wsj.com/page/mdc/2_0500-bondyield-10.html

  7. More Advanced Topics • Callability • Indenture • Convertible Bonds • Zero Coupon Bonds • Asset-Backed Securities • Trading Bonds

  8. Sources Used • Slide 6 Graph - http://www.nationalbanken.dk/DNUK/Publications.nsf/1c326d7c6cdf6f66c1256c080048787c/c0c3f38e9a9bd828c1256ca600559774/$FILE/s69.gif • Slide 5 Graph - http://www.frbsf.org/publications/economics/letter/2004/el2004-36.pdf • Slide 7 Graph - http://www.marketthoughts.com/images/20050317/chart01.gif • Slide 8 Graphs – • http://www.federalreserve.gov/boarddocs/hh/2002/july/gifjpg/mpr702spreads_corp_bonds_offrun.gif http://www.federalreserve.gov/boarddocs/hh/2004/july/gifjpg/41-spreads_corp_bonds.gif Slide 9 Graph – http://www.federalreserve.gov/boarddocs/hh/2005/july/fullreport.pdf

More Related