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The Bond Market 1

The bond market consists of longer-term debt instruments like Treasury notes and bonds, corporate bonds, and municipal bonds. These instruments provide either fixed or formula-determined streams of income. Treasury notes have maturities of 1-10 years while bonds have maturities of 10-30 years, and both make semiannual coupon payments. There is also an international bond market where foreign issuers can borrow abroad and international investors can purchase bonds in other countries. Municipal bonds are issued by state and local governments and provide federal, state, and local income tax exempt interest to holders.

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Robin Ruel
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49 views15 pages

The Bond Market 1

The bond market consists of longer-term debt instruments like Treasury notes and bonds, corporate bonds, and municipal bonds. These instruments provide either fixed or formula-determined streams of income. Treasury notes have maturities of 1-10 years while bonds have maturities of 10-30 years, and both make semiannual coupon payments. There is also an international bond market where foreign issuers can borrow abroad and international investors can purchase bonds in other countries. Municipal bonds are issued by state and local governments and provide federal, state, and local income tax exempt interest to holders.

Uploaded by

Robin Ruel
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© © All Rights Reserved
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THE BOND MARKET

Presented by: ROBIN M. RUEL BSBA IV B

THE BOND MARKET


It is composed of longer-term borrowing or debt
instruments than those that trade in the money
market.
This market includes Treasury notes and bonds,
corporate bonds, municipal bonds, mortgage
securities.

THE BOND MARKET


These instruments are sometimes said to
comprise the fixed-income capital market,
because most of them promise either a fixed
stream of income or stream of income that is
determined according to a specified formula .
-

TREASURY NOTES OR BONDS


Treasury notes Debt obligations of the
government with original maturities of one year
or more.
- The Philippine Government borrows funds by
selling Treasury Notes (T-notes ) and bonds (Tbonds)

TREASURY NOTES OR BONDS


T-note maturities range up to 10 years,
while T-bonds are issued with maturities 10 to 30 years.
Both bonds and notes make semiannual interest payments
called coupon payments, so name because if pre computer
days, investors would literally clip a coupon attached to the
bond and present it to an agent of the issuing firm to
receive the interest rate.

INTERNATIONAL BONDS
Many firms borrow abroad and many
investors buy bonds from foreign issuers. In
addition to national capital markets, there is
a thriving international capital market,
largely centered in London, where banks of
over 70 countries have offices

INTERNATIONAL BONDS
Eurobond is a bond denominated in a currency
other than that of the country in which it is issued.
European-dollar bond a dollar denominated bond
sold in Britain.
Euroyen bond yen denominated bonds sold in
Japan
Yankee Bond is a dollar-denominated bond sold in
US by a non-U.S issuer.
Samurai bonds are yen denominated bonds sold
in Japan by a non-Japanese issuers.

MUNICIPAL BONDS
- Munis are issued by state and local

governments.
- They are similar to treasury and corporate
bonds, except their interest income is
exempt from federal income taxation.

MUNICIPAL BONDS
The interest income is also exempt from state
and local taxation in the issuing state.
Capital gains taxes, however, must be paid on
munis if the bonds mature or are sold for more
than investors purchase price.

MUNICIPAL BONDS
Two types of municipal bonds:
General obligation bonds bonds that are
backed by the full faith and credit (i.e.,
taxing power) of the issuer.
Revenue bonds are issued to finance
particular projects and are backed either by
the revenues from the project or by the
municipal agency operating the project.

MUNICIPAL BONDS
TYPICAL ISSUERS OF REVENUE BONDS:

Airports
Hospitals
Turnpike
Port authorities

MUNICIPAL BONDS
A particular type of revenue bonds is the
industrial development bond, which is issued
to finance commercial enterprises, such as the
construction of a factory that can be operated
by a private firm. In effect, this device gives
the firm access to the municipalitys ability to
borrow at tax-exempt rates.

MUNICIPAL BONDS
Like Treasury bonds, municipal bonds vary widely in
maturity. A good deal of the debt issued is in the form
of short-term tax anticipation notes that raise funds to
pay for expenses before actual collection taxes.
Other municipal debt may be long term and used to
fund large capital investments. Maturities range up to
30 years.
The key feature of municipal bonds is their taxexempt status.

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