Chapter 2

Question 1

UK Government Bonds

Answer 1

Treasury bills
Issued at a discount to maturity don’t pay coupons.
Short term, maturity dates are one month three months or six months.

Treasury gilts
Conventional government bonds fixed coupon and mature date.
Coupons are paid every six months on seventh of June and seventh of December or seventh of March and seventh of September.

Once issued by DMO can be traded on secondary market.
- Shorts - conventional dated gilts 7 years to redemption
- Mediums - conventional dated gilts 7 - 15 years to redemption.
Longs - conventional dated gilts 15 + years to redemption.

Question 2

US Government Bonds

Answer 2

Treasury bills
Zero coupon bonds traded in the secondary market priced at a yield to maturity basis. Maturities of 28, 91 or 182 days.

Treasury notes
Conventional bonds with fixed coupons and redemption dates.
Maturities from 2, 5 or 10 years.

Treasury bonds
Conventional bonds.
Maturities of between 10 and 30 years.

Treasury inflation protected securities (TIPS)
Index-linked bonds. Principle value is adjusted regular based on CPI coupon remains constant but based on the changing principle value. Interest is paid half yearly.

Question 3

Japanese Government Bonds

Answer 3

Short term
Zero coupon.
Maturities between 6months and 1 year.

Medium term
Conventional bonds. Fixed coupons payable half yearly and set redemption dates.
Maturities of 2 or 5 years.

Long term bonds
Conventional bonds.
Maturities of 10 years.

Super long term bonds
Maturities of 20, 30 and 40 years.
15 year bonds also issued paying floating interest rates.