seasoned issue
issuance of additional securities by a already public traded company
whats the maturity of a treasury bond vs treasury note
Bond:10-30 year
Note:1-10
how does inflation effect treasury bond
lowers purchasing power of fixed payments
TIPS
Treasury inflation protected securities: adjusts to inflation based on CPI
STRIPS
allow separation of a treasury bond interest payments and principle with each payment being sold as a separate zero coupon bond
who issues agency bonds
Gov Sponsored enterprises, the bonds are slightly more risky that treasury bonds not backed by gov
what are agency bonds
used to enhance flow of credit to specific sectors , for those less able to access funding(section 8)
what are municipal bonds
used to finance public interest projects except from taxation by local, county, and state governments(not default free .63%)
what are the two types of Municipal bonds
General obligation bonds
Revenue bondsa
what is the difference between General obligation bonds and revenue bonds(municipal)
GOB- backed by tax revenue
RB-Backed by project revenue
Corporate bonds?
to raise capital for corporations, more risky due to issuers creditworthiness
how often of corporate bonds paid coupons
semiannually
what are restrictive covenants
conditions imposed to protect bondholders(limitations on additional debt or dividend payouts”
what is a call provision on a corporate bond
allows issuer to redeem bond before maturity date when interest rates fall
are they compensated for call provisions
yes, with a premium often Par+ one year interest
how is the conversion rate set for convertible bonds?
it is set at condo issuance
when can issing convertible bonds be more convenient that issuing new stocks
when company wants to raise capital but expects stock price to rise
what are types of secured and non secured corporate bonds
secured bonds are backed by specific assets. while non secured bonds are backed only by general creditworthiness of the issuer
what is a CDS
Credit default swap - acts as insurance against default
How do CDS protect investors from default risk
the CDS buyer pays a premium if the issuer of the underlying bond defaults, the CD seller compensates the buyer for the loss
who are the lenders in money markets
US treasury, commercial banks, insurance companies, pension funds, and individuals
who are the borrowers in the money markets
US treasury, businesses, investment companies, and federal reserve
What are treasury bills risk and liquidity
Low default and inflation risk
highly liquid due to secondary markets
how do auctioning treasury bills work
Sold via competitive and noncompetitive bids, the highest accepted yield applies to all bidders
