Fixed Income: Markets, Issuance, Trading, and Funding Flashcards
Agency Bonds
A bond issued by an entity that is either owned or sponsored by a national government.
Auction
A type of bond issuing mechanism often used for sovereign bonds that involve bidding.
Backup lines of credit
A type of credit enhancement provided by a bank to an issuer of commercial paper to ensure that the issuer will have access to sufficient liquidity to repay maturing commercial paper if issuing commercial paper is not a viable option
Benchmark issue
The latest sovereign bond issue for a given maturity. It serves as benchmark against which to compare bonds that have the same features but that are issued by another type of issuer.
Best effort offering
An offering of a security using an investment bank in which the investment bank, as agent for the issuer, promises to use its best efforts to sell the offering but does not guarantee that a specific amount will be sold.
Bid-Ask Spread
The difference between the prices at which dealers will buy from a customer (bid) and sell to a customer (offer or ask). It is often used as an indicator of liquidity.
Bid-Offer Spread
The difference between the prices at which dealers will buy from a customer (bid) and sell to a customer (offer or ask). It is often used as an indicator of liquidity
Bilateral loan
A loan from a single lender to a single borrower.
Bridge financing
Interim financing that provides funds until permanent financing can be arranged.
Central bank funds market
The market in which deposit-taking banks that have an excess reserve with their national central bank can loan money to banks that need funds for maturities ranging from overnight to one year. Called the federal or fed funds market in the United States.
Central bank funds rates
Interest rates at which central bank funds are bought (borrowed) and sold (lent) for maturities ranging from overnight to one year. Called federal or fed funds rates in the US.
Certificate of Deposit
An instrument that represents a specified amount of funds on deposit with a bank for a specified maturity and interest rate. CDs are issued in various denominations and can be negotiable or non-negotiable.
Commercial paper
A short-term, negotiable, unsecured promissory note that represents a debt obligation of the issuer.
Credit-linked note (CLN)
Fixed-income security in which the holder of the security has the right to withhold payment of the full amount due at maturity if a credit event occurs
Firm commitment offering
A type of securities issue mechanism in which the investment bank guarantees the sale of the securities at an offering price that is negotiated with the issuer.
Grey Market
The forward market for bonds about to be issued.
Guarantee certificate
A type of structured financial instrument that provides investors capita protection. It combines a zero-coupon bond and a call option on some underlying asset.
Haircut
The difference between the market value of the security used as collateral and the value of the loan.
Interbank market
The market of loans and deposits between banks for maturities ranging from overnight to one year.
Interbank money market
The market of loans and deposits between banks for maturities ranging from overnight to one year.
Inverse floater
A type of leverage structured financial instrument. The cash flows are adjusted periodically and move in the opposite direction of changes in the reference rate.
London interbank offered rate (LIBOR)
Collective name for multiple rates at which a select set of banks believe they could borrow unsecured funds from other banks in the London interbank market for different currencies and different borrowing periods ranging from overnight to one year.
Medium-term note
A corporate bond offered continuously to investors by an agent of the issuer, designed to fill the funding gap between commercial paper and long-term bonds.
Municipal Bonds
A type of non-sovereign bond issued by a state or local government in the United States. It is very often (but not always) offers income tax exemptions.
Munis
A type of non-sovereign bond issued by a local or state government in the United States. It very often (but not always) offers income tax exemptions.
Non-Sovereign Bonds
A bond issued by a government below the national level, such as a province, region, state, or city.
Non-Sovereign Govt Bonds
A bond issued by a government below the national level, such as a province, region, state, or city.
On-the-run
The most recently issued and most actively traded sovereign securities.
Open market operations
The purchase or sale of bonds by the national central bank to implement monetary policy. The bonds traded are usually sovereign bonds issued by the national government.
Organized Exchange
A securities marketplace where buyers and seller can meet to arrange their trades
Over-the-counter(OTC) markets
A decentralized market where buy and sell orders initiated from various locations are matched trough a communications network.
Primary bond markets
Markets in which issuer first sell bonds to investors to raise capital.
Primary dealers
Financial institutions that are authorized to deal in new issues of sovereign bonds that serve primarily as trading counter parties of the office responsible for issuing sovereign bonds.
Private placement
Typically, a non-underwritten, unregistered offering off securities that are sold only to an investor or small group of investors. It can be accomplished directly between the issuer and the investor(s) or through an investment bank.
Public Offer
An offering of securities in which any member of the public may buy the securities.
Public offering
An offering of securities in which any member of the public may buy the securities.
Quasi-Government Bonds
A bond issued by an entity that is either owned or sponsored by a national government.
Repo
A form of collaterized loan involving the sale of a security with a simultaneous agreement by the seller to buy the same security back from the purchaser at an agreed-on price and future date. The party who sells the security at the inception of the repurchase agreement and buys it back at maturity is borrowing money from the other party, and the security sold and subsequently repurchased represents the collateral.
Repo Margin
The difference between the market value of the security used as collateral and the value of the loan.
Repo Rate
The interest rate in a repurchase agreement
Repurchase Agreement
A form of collaterized loan involving the sale of a security with a simultaneous agreement by the seller to buy the same security back from the purchaser at an agreed-on price and future date. The party who sells the security at the inception of the repurchase agreement and buys it back at maturity is borrowing money from the other party, and the security sold and subsequently repurchased represents the collateral.
Repurchase date
The date when the party who sold the security at the inception of a repurchase agreement buys the security back from the cash lending counterparty
Repurchase price
The price at which the the party who sold the security at the inception of the repurchase agreement buys the security back from the cash lending counter party
Reverse repo
A repurchase agreement viewed from the perspective of the cash lending counterparty.
Reverse repurchase agreement
A repurchase agreement viewed from the perspective of the cash lending counterparty.
Secondary bond markets
Markets in which existing bonds are traded among investors.
Serial maturity structure
Structure for a bond issue in which maturity dates are spread out during the bonds life; a stated number of bonds mature and are paid off each year before final maturity.
Settlement
The process that occurs after a trade is completed, the securities are passed to the buyer, and payment is received by the seller.
Shelf registration
Type of public offering that allows the issuer to file a single, all encompassing offering circular that covers a series of bond issues.
Sovereign
A bond issued by a national government.
Sovereign bond
Bond issued by a national government.
Structured financial instruments
Financial instruments that share common attribute of repackaging risks. Structured financial instruments such as capital protected, yield enhancement, participation and leveraged instruments.
Supranational Bonds
A bond issued by a supranational agency such as the world bank.
Syndicated loans
Loans from a group of lenders to a single borrower
Syndicated offering
A bond issue that is underwritten by a group of investment banks.
Term maturity structure
Structure for a bond issue in which the bonds notional principal is paid off in a lump sum at maturity.
Underwriter
A firm usually an investment bank, that takes the risk of buying the newly issued securities from the issuer, and then reselling them to investors or to dealers, thus guaranteeing the sale of the securities at the offering price negotiated with the issuer.
Underwritten offering
A type of securities issue mechanism in which the investment bank guarantees the sale of the securities at an offering price that is negotiated with the issuer.
