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Bond Markets: Financial Markets and Institutions, 7e, Jeff Madura
Bond Markets: Financial Markets and Institutions, 7e, Jeff Madura
Bond Markets
Chapter Outline
Background on bonds
Treasury and federal agency bonds
Municipal bonds
Corporate bonds
Institutional use of bond markets
Globalization of bond markets
Background on Bonds
Bond yields
The annualized yield that is paid by the issuer over the life of the
bond
Equates the future coupon and principal payments to the initial
proceeds received
Does not include transaction costs associated with issuing the bond
Earned by an investor who invests in a bond when it is issued and
holds it until maturity
Online
trading
http://www.investinginbonds.com
http://www.federalreserve.gov/releases/H15/
Several
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Savings bonds
Municipal Bonds
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Credit risk
Less
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Tax advantages
Interest
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http://www.tradingedge.com
Online
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Corporate Bonds
Default
rate
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Bond ratings
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Protective covenants:
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provisions:
The difference between the call price and par value is the
call premium
Bond collateral
Typically,
Unsecured
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Variable-rate bonds:
Allow investors to benefit from rising market interest rates over time
Allow issuers of bonds to benefit from declining rates over time
Convertibility
Convertible bonds allow investors to exchange the bond for a stated
number of shares of common stock
Investors are willing to accept a lower rate of interest on convertible
bonds
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http://www.schwab.com
http://www.etrade.com
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Junk bonds
Currently about 3,700 junk bond offerings exist with a market value
of $80 billion
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Performance
of junk bonds
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Eurobond market
Bonds
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