CH 20 - Debt Securities: Characteristics, Risks, Trading and Yield Curves Flashcards
Government of Canada issues the following securities (3)
- Fixed-coupon marketable bonds
- Treasury bills (T-bills)
- Real-return bonds
3 NON-GOVERNMENT ISSUERS
- Corporations
- Asset-backed securities
- Foreign corporations and governments
4 FEATURES OF DEBT SECURITIES
Amount (principal)
Principal repayment provisions
Interest payment provisions
Options (ex: call feature)
What is yield to maturity
measure of the annual return on the security if it is held to maturity
ranking of corporation’s capital structure (6)
- First mortgage liabilities and asset-backed securities
- Secured debt
- Unsecured debentures
- Capital securities
- Preferred shares
- Common shares
3 organizations that provide credit ratings
- DBRS
- Moody’s Canada Inc.
- Standard & Poor’s Rating Services (S&P).
3 types of Money Market Securities
- T-bills
- Bankers’ acceptance
- Commercial paper
what is a Commercial paper
unsecured promissory note issued by a corporation or backed by a pool of underlying financial assets in asset-backed security form.
minimum investment for Bankers acceptance and Commercial paper
25,000
pool factor (MBS)
percentage of original principal remaining in the mortgage pool after the month’s payments.
four different NHA MBS
- Exclusive homeowner
- Multi-family
- Social housing
- Mixed (combination)
Open NHA MBS
allows mortgagers to make early principal prepayments
Issuer extendible notes
Issuer has the right to either allow the bond to mature or to extend the maturity. Risk so higher yields
Credit analysis includes the following components:
- Determine the issuer’s existing obligations
- Identify available assets as protection in case of default
- Analyze liquidity and borrowing needs
- Analyze cash flow needs
On-the-run issues
known as benchmarks and are the more liquid issues
