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CISI Securities > Asset Classes: Debt Types > Flashcards

Asset Classes: Debt Types Flashcards

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SIE Exam flashcards
1
Q

maturity of a bill versus a bond

A

bill less than 1 year maturity

bond more than 1 year maturity

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2
Q

4 features of a bond

A

coupon

name

nominal value

redemption (maturity)

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3
Q

who issues UK government bonds on behalf of treasury

A

debt management office (DMO)

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4
Q

what is an index-linked bond

A

coupon and redemption are linked to an inflation index (so they are inflation protected)

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5
Q

which inflation index are UK inflation linked bonds indexed to

A

retail price index (RPI)

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6
Q

in which countries is there a developed strips market

A

US, UK and Japan

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7
Q

which parties are permitted to strip gov bonds in the UK

A

GEMMS
HM Treasury
Bank of England

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8
Q

how to convert bond into number of strips and what are the strips

A

maturity x 2 + 1

5 year bond = 11 strips (11 zero coupon bonds)

this is for semi annual coupon

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9
Q

what is reinvestment risk

A

where the investor may not receive a required rate of return when investing coupon payments

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10
Q

what is dedication and what is the easiest way to do this

A

where investor matches maturity of cash flows to the liabilities

simplest way to do this is with a zero coupon bond

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11
Q

two types of french government bonds and their maturity

A

BTF: less than 1 year

OATs: 2-50 years

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12
Q

coupon frequency for french gov bonds

A

annual

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13
Q

french government bond settlement

A

T+2

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14
Q

4 types of german gov bonds and their maturity

A

bubills: 6-12 months

schatz: 2yrs

bobl: 5 years

Bund: 10-30 years

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15
Q

german gov bond coupon frequency

A

annual

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16
Q

german gov bond settlement

A

T+2

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17
Q

UK gov bonds 4 types and maturity

A

T-bills: less than 1 year

short: less than 7 years

medium: 7-15 years

long: greater than 15 years

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18
Q

UK gilt coupon frequency

A

semi annual

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19
Q

UK gilt settlement

A

T+1

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20
Q

USA 3 types of gov bonds and maturity

A

T-bills: less than 1 year

T-notes: 2-10 years

T-bonds: greater than 10 years

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21
Q

US gov bonds coupon frequency

A

semi annual

22
Q

US gov bonds settlement time

A

T+1

T-bills - trade date

23
Q

japan gov bond maturity range and which is most common

A

2-40 years

10 year most common

24
Q

japan gov bonds coupon frequency

A

semi annual

25
Q

japan gov bond settlement date

A

T+1

26
Q

what are the two types of secured corporate debt

A

fixed charged over assets

floating charge over assets

27
Q

what is fixed charge over assets

A

bond secured against a certain asset e.g. land or a building

28
Q

what is floating charge over assets

A

bond secured against a class of assets e.g. plant and machinery, trade receivables

29
Q

what is another name for unsecured debt

A

loan stock

30
Q

what is a debenture in the UK vs US

A

UK - secured debt
US - unsecured debt

31
Q

what is US secured debt commonly known as

A

ABS - asset backed security

32
Q

difference between covered bond and asset backed security

A

covered bond: pool of assets is owned by the originator

ABS: pool of assets is owned by an SPV

33
Q

what are the 4 types of trustee for secured debt

A

note trustee

security trustee

share trustee

successor trustee

34
Q

typical maturity of unsecured corporate debt

A

7-30 years

35
Q

5 types of unsecured debt

A

convertible bonds
exchangeable bonds
guaranteed bonds
floating rate notes
payment in kind notes

36
Q

difference between convert and exchangeable bond

A

convertible - converts into stock of the issuer

exchangeable - converts into another company’s stock (usually subsidiary of the issuer)

37
Q

what type of unsecured debt is generally subordinated debt

A

payment in kind

38
Q

what are eurobonds

A

international bonds
bearer documents
issued in a eurocurrency (any other currency than that of the market it is issued on)

39
Q

where are eurobonds traded

A

typically OTC but some are exchange traded

40
Q

who regulates eurobonds

A

ICMA - international capital markets association

41
Q

where are trades reported and matched for eurobonds

A

TRAX

42
Q

what is settlement for eurobonds if settled through euroclear / clearstream

A

T+2

43
Q

eurobond coupons are what

A

gross annual coupons

44
Q

day count convention for eurobonds

A

30/360

45
Q

what does immobilisation mean re eurobonds

A

often are held in depositaries because are bearer documents

46
Q

4 variants of eurobonds

A

straight or plain vanilla - fixed coupon annually

zero coupon bonds - issued at discount and redeemed at par

floating rate eurobonds

stepped bonds - coupon increases over the life of the bond

47
Q

what is the debt seniority in order from 1 to 9

A
  1. liquidator
  2. fixed charge holders
  3. preferential creditors e.g. employees
  4. floating charge holders
  5. unsecured creditors
  6. subordinated loan stock
  7. mezzanine debt
  8. preference shareholders
  9. ordinary shareholders
48
Q

where do guaranteed and convertible bonds rank in seniority

A

alongside other unsecured bonds

49
Q

lowest IG credit rating

A

BBB- or Baa3 if moody’s

50
Q

bond in default rating for the three agencies

A

S&P: D
moody’s: C
fitch: D

CISI Securities (2 decks)

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