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Fixed Income

Intro to FM module on FI
by

Genesis Briones

on 19 December 2014

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Transcript of Fixed Income

A new journey...
FIXED INCOME
What are Bonds
A
debt instrument
issued for a period of
more than one year
with the purpose of
raising capital by borrowing
.
Generally, a bond is a promise to repay the principal along with interest (coupons) on a specified date (maturity). Some bonds do not pay interest, but all bonds require a repayment of principal.
WHAT ARE BONDS
What terms, details and data should you expect in a typical Bonds Quote page
BOND QUOTES
Principal
Tenor
Life
Issuer
Coupon
Maturity
TARDINESS:
Thou shalt not be tardy!
If thou art late,
then thou shalt perform for the class!!!
Tune for day 1: Ice Ice Baby
Sung while doing the "Running Man"
Tune for day 2: My Way
Everyone else in class will be handed
knives and broken bottles
FACEBOOK
TEXTING
DISINTEREST
FOCUS ON
THE TOPIC
ON HAND
GENESIS
Supranationals
IFC (International Finance Corp)
Sovereigns
Municipals
Agencies
Corporations
Special Purpose Vehicles
SUPRANATIONAL
An international organization, or union, whereby member states transcend national boundaries
or interests to share in the decision-making and vote on issues pertaining to the wider grouping.
Investopedia Says
Investopedia explains 'Supranational'
The European Union and the World Trade Organization are both supranationals. In the EU, each member votes on policy that will affect each member nation. The benefits of this construct for the EU are the synergies derived from social and economic policies along with a stronger presence on the international stage.

Read more: http://www.investopedia.com/terms/s/supranational.asp#ixzz2586STY3B
The International Finance Corporation (IFC) is the private sector lending arm of the World Bank Group, providing financial services to businesses investing in the developing world.

The IFC was established in 1956 to support the growth of the private sector in the developing world. The IFC's stated mission is “to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives.”
SOVEREIGNS
Bonds backed by the full faith and credit of national governments are
called sovereigns.
Capital raised by sovereigns try to cover the shortfall between taxation revenue & expenditure.
BOND ISSUERS
MUNIS
Includes States and Local Governments. Funds specific projects.
US Munis are exempt from US Federal Income Taxes and income taxes in the issuer's state
Federal National Mortgage Association (FNMA)
Federal Home Loan Mortgage Corporation
Federal Home Loan Banks System
Federal Farm Credit Banks Funding Corporation
Student Loan Marketing Association
Government National Mortgage Association
Tennessee Valley Authority
Government Sponsored Agencies
CORPORATIONS
Borrow money to fund their operations & activities.
Special
Purpose
Vehicles
BOND TYPES
Consider the Issuer, where it is issued and the currency of the issuance
BY MARKET
DOMESTIC
FOREIGN
INTERNATIONAL
EURO
GLOBAL
TERMS AND CONDITIONS
REDEMPTION
Callable
Putable
COUPON
Bullet
Zero-Coupon
Floating Rate
Inflation Linked
Index Linked
Stepped
CREDIT RATING
Investment Grade
High Yield / Junk
GUARANTEE
Covered
Securitized
Sinking Fund
OTHER TERMS
& CONDITIONS
Dual Currency
Convertible
Exchangeable
Identifier
PHGV 7.750 23-Aug-2017
Issuer
Coupon
Maturity
YIELD
DURATION
CONVEXITY
BENCHMARK
PRICE
How much will an investor pay
for a bond quoted on June 30 in the US at 112.2 when the bond has a face value of 1000, matures on 31 Dec 2025, carries a coupon of 12% paid annually? Use 30/360 as the daycount convention.
What would be the price if this was quoted in a European Exchange?
CONGRATULATIONS!
You may proceed to the rest of your journey
YIELD
Current Yield
Yield to Maturity
Yield to Call/Put/Worst
PRICE:
Dirty vs Clean
Bond Markets
Primary Market
Secondary Market
Grey Market
Auction
Public Placement
MARKET RISK
CREDIT RISK
DEFAULT RISK
FX RISK
LIQUIDITY RISK
RISKS
Full transcript