Bond markets cards only related to essay questions Flashcards
What are Eurobonds?
Eurobonds are bonds issued offshore by governments or corporates denominated in a currency other than that of the issuer’s country. Both bond issuer and bond investor could come from anywhere in the world.
What are international bonds?
Bonds issued in large domestic markets by overseas issuers. While the issuer is international, the investors are domestic.
What are mortgage-backed securities (or MBS)?
Bonds backed by a pool of mortgages. The coupons and final principal payment come from the payment of interest and principal from the mortgages.
What are Islamic bonds (a.k.a. Sukuk)?
Islamic law discourages the charging of interest. To get around this prohibition there is now a fairly large and rapidly growing market for so called Islamic bonds (known as Sukuk). The income on these bonds is not based on coupon rates but rather on a principal of sharing of returns. They are thus, in many ways, more like equity than a bond.
What have been the government bond yield rates in the US over the last few decades?
Up until 2020, for several decades bond yields were decreasing due to decreasing inflation. Inflation increased 2020-2023 and bond yields continue to increase.
What are the main bond types?
- Domestic government bonds
- Sovereign bonds (emerging markets issue bonds overseas in domestic currency)
- Corporate bonds
- Eurobonds (issuer and investor can both be international)
- International bonds (issuer is international, investor is domestic to the market)
- Public corporation bonds (e.g., by government owned post offices)(often guaranteed by governments)
- Municipal or local government bonds
- Mortgage backed securities (MBS)
- Structured credit securities (bonds backed by a pool of assets)
- Islamic bonds (a.k.a. Sukuk)
Maybe make a flash card on bond issue asymmetries covered in end of lecture notes.
Could potentially be in the exam.
