Debt Securities Flashcards
Sinking fund
Stretch
Reverse REPO
Banks lending money to fed, t-bills collateral
T-bills
6 months or less, pays no interest, always issued at discount, Dutch auction, not quoted in 32nds
Money mkt instrument
How are govt bonds quoted
32nds
CDO
Collateralized debt obligation - backed by pool of loans, bonds, other debt, like credit cards or auto loans
Eurobond
Foreign issuer
Foreign currency
Foreign country
Long term
Not registered with SEC
YTM
(Annual interest + annual discount per year OR - annual premium per year)/ (purchase price + par value / 2)
Make sure to convert interest and annual disc/prem into dollars$$$
Also, the annual disc/prem is calculated from the purchase price
The bond could be bought at a prem or disc
The bond could be called at a prem or a disc
YTC
See YTM, except annual discount or premium per year is adjusted to reflect only up to the earliest call date
Term bonds
Issued same time, same maturity, quoted % of par, called randomly
Step coupon bond
Start at a low coupon and step up at specific intervals
Nominal yield
Quoted on bond, remains fixed, represents the fulcrum
Eurodollars
US money invested in foreign banks, traded in NY and London
GNMA
Ginni Mae - only direct obligation of Fed govt
T-notes
1 - 10 year maturities
Jumbo Cd
Min of $100k, $1mm common, negotiable, tradable, no fdic, has coupons and accrued interest
LIBOR
Equivalent of effective fed funds rate for foreign banks, US dollars
Convertible bond parity
Market price/conversion ratio
T-bonds
10 - 30 year maturities
Unsecured debt types
Debentures - standard full faith and credit
Income - no interest till company is profitable, think bankruptcy distressed debt
Current yield
Annual interest/market price
Refunding
Think refinancing of debt, new bonds issued to pay off old ones
Balloon issue
Similar to serial, except more bonds mature in later years
Eurodollar bond
Foreign OR domestic issuer Issued oversees Domestic currency Short term Principal and interest paid in US dollars Traded in both US and foreign mkts
Not registered with SEC
REPO
Repurchase agreement - loans secured with t-bills, usually overnight, up to 90 days, usually btwn fed and banks
Serial bonds
Issued same time, equal amounts mature each year, quoted YTM
Pre funded
Stretch
T-strips
Pay no interest, issued at discount, not quoted in 32nds
Accrued interest
Corps and munis based on 30 day month and 360 day year
Govt bonds based on actual days in month and year
Calculated from previous coupon date, up to but NOT including the settlement date
Bankers acceptance
Similar to post dated check, used for import/export, no interest, issued at discount, time draft
Effective fed funds rate
Average fed funds rate computed daily
Zero coupon
Stretch
Commercial paper
Unfunded, unsecured short term corporate debt, maturity less than 270 days,
Series bond
Issued successive years with one maturity date
Secured bond types
Mortgage bonds
Equipment trusts
Collateral trusts - stocks and bonds
Guaranteed bonds - by parent company
Describe the debt seesaw
Stretch
Fed funds rate
Interest rate between BD’s, banks and financial institutions, most volatile
Convertible bond conversion ratio
Par/conversion price
Cmo ads
Can’t be compared to a any other security except cmo
Auction rate securities
Stable prices
Variable rates
Oid
Original issue discount
Like t-bills
