Debt Securities Flashcards
Tender offer
Buy securities for cash
Issuer makes tender offers in low interest rates
Secured bonds
Specific assets as collateral
Open Trust indenture
Agreement between issuer and trustee allowing issuer to issue more bonds of the same class later date. Subsequent issue secured by same collateral with equal liens to property
Debentures
Backed by general credit
Guaranteed Bonds
Backed by company other than the issuer, such as parent company
Income Bonds
Adjustment Bonds
Pay interest only if company has enough income. Common for firms coming out of bankruptcy
Zero coupons
Sold at deep discount and mature at par
More volatile than other bonds
Taxed annual for amount the bond has accreted despite not receiving the income
Closed-end covenant
Have senior claim on assets even if firm issues bonds secured by same assets
Senior lien bonds
Treasury receipts
Like zero coupon bonds
Broker/dealer buys securities, place in trust and sell separate receipts backed by the securities
Not backed by U.S. Government
STRIPS
Like receipts, but backed by the gov
Which agency security is fully backed by the gov?
Ginny Mae
Which instrument not subject to reinvestment risk?
Zero coupon bond
Competitive Bids
Placed by primary dealers like Jp Morgan, citi, BoA
Required to bid and bids not always filled
Trading flat
No accrued interest
Sinking Fund
For lower rated securities, increase marketability
Fund operated by bond’s trustee for redemption
