TITLE: Analysis of Globally Available Debt Instruments

Submitted by:
Taha Ahmed (55164)
Rabia Haneef (59563)

Introduction
Debt instruments, such as bonds, notes, and bills, are essential for raising capital for a variety of
organizations, including corporations and governments. They stand for an agreement to pay back
borrowed funds plus interest over a predetermined time frame. The world's debt instruments have
changed dramatically in the last few years as a result of monetary policy changes, investor preferences,
and economic changes. With an emphasis on interest rates, issuance volumes, maturity, interest payments,
risk, and investor demand. This research examines trends in a number of debt instruments, including US
Treasury bonds, Japanese Government Bonds (JGBs), Sukuk (Islamic bonds), Treasury bills (T-Bills),
German Bunds, and US Treasury bonds. The analysis spans the years 2019 through 2023.

Data Analysis
Data from a variety of sources, including the US Department of the Treasury, the Islamic Financial
Services Board (IFSB), the German Finance Agency, the Japanese Ministry of Finance, and significant
financial data providers like Bloomberg and Reuters, were evaluated in order to comprehend patterns in
particular debt products. Important metrics comprised:

1. Maturity: The time until the debt instrument's principal is repaid, ranging from short to long term.
2. Interest Payments: The compensation to bondholders, either as periodic coupon payments or
accrued discounts for zero-coupon instruments.
3. Risk: The potential for financial loss due to credit, interest rate, inflation, or liquidity factors.
4. Issuance Volume: The total amount of debt issued annually broken down by kind of instrument.
5. Interest Rates and Yields: Trends in interest rates and yields that represent investor returns and the
cost of borrowing.
6. Credit Ratings: Ratings denoting default risk that are given to various issuers.
7. Investor Demand: Information on the interest in different types of debt securities.

US Treasury Bonds
Long-term debt securities issued by the U.S. Department of the Treasury.
Maturity: 20 to 30 years on average.
Interest Payments: Interest is paid in semi-annual amounts (coupon payments).
Risk: Because they are supported by the full faith and credit of the United States government, they are
regarded as low-risk.
Volume of Issues: • 2019: A moderate volume of issues demonstrating consistent economic expansion.
• 2020: Record issuance as a result of fiscal stimulus linked to the pandemic.
• 2021–2022: Increased issuance persisted in funding ongoing attempts to revive the economy.
• 2023: Compared to levels prior to the pandemic, issuance volumes stabilized but remained high.
Interest Rates and Yields: • 2019: A balanced economic outlook was reflected in the yields, which
remained generally stable.
• 2020: The Federal Reserve lowered interest rates, causing yields to drop to all-time lows.
• 2021–2023: Gradual rise in yields as a result of the Fed's decision to raise rates in order to fight
inflation.
Credit ratings: Because of the US government's excellent creditworthiness, they are consistently high
(AA+) according to S&P.
Investor Demand: Demand from investors remained strong, with Treasuries being viewed as a safe
haven in times of economic uncertainty.

Sukuk (Islamic Bonds)

Sharia-compliant bonds that give investors returns without charging interest, which is against Islamic law.
Structure: Usually involves a profit-sharing arrangement or is asset-backed.
Interest Payments: The profit from the underlying asset is used to produce returns; there are no typical
interest payments.
Risk: Changes based on the issuer and the underlying assets.
Issuance Volume: • 2019: Steady growth in issuance as more countries and corporations adopted Sukuk.
• 2020–2021: Sukuk adoption for infrastructure and development financing by nations with a majority of
Muslims as well as other countries led to further increase in issuance.
• 2022–2023: Ongoing growth, including noteworthy issuances from Saudi Arabia, the United Arab
Emirates, and Malaysia.
Interest rates and yields for 2019: Because of the extra complexity and adherence to Sharia law, these
rates and yields are typically higher than those of ordinary bonds.
• 2020–2023: Yields increased moderately in accordance with patterns in interest rates around the world.
Credit ratings: Vary greatly depending on the nation issuing the Sukuk, but are typically high for
sovereign Sukuk issued by nations like Saudi Arabia and Malaysia.
Investor Demand: Investors looking for Sharia-compliant assets as well as Islamic financial institutions
have a high demand.

Treasury Bills (T-Bills)

Short-term debt securities issued by the Government of the respective country such as U.S, Pakistan etc.
We’ll take Pakistani T-bills into account to analyze data.
Maturity: Commonly issued with maturities of 3 months (91 days), 6 months (182 days), and 12 months
(364 days).
Interest payments are made at a discount to face value; interest is calculated as the price differential
between the purchase price and face value.
Risk: T-Bills are regarded as low-risk because they are backed by the Pakistani government; nonetheless,
the risk is higher than that of T-Bills from nations with better credit ratings, such as the US.
Volume of Issues: 2019: Consistent issuance in line with standard short-term financing needs was made.
2020–2021: During the COVID-19 epidemic, there was a notable rise in issuance to meet the
government's immediate financial demands.
2022–2023: When the economy started to improve and the government started to move some of its
borrowing to longer-term debt instruments, issuance stabilized.
Interest rates and yields: In 2019, the yields showed stability in the economy, remaining largely
unchanged although being slightly higher than in previous years.
2020: As a result of the State Bank of Pakistan's low-interest-rate policy to boost the economy during the
epidemic, yields dramatically fell.
2023: As a result of the State Bank of Pakistan's monetary policy changes and the ongoing economic
recovery, yields kept rising.

Ratings: The country's overall political and economic stability can be inferred from Pakistani T-Bill
credit ratings. In the context of Pakistan's economy, they are generally regarded as safe, but their credit
ratings are lower than those of wealthy nations, which reflects the increased perceived risk. The credit
rating agency PACRA bases its ratings on a number of variables, including the nation's fiscal soundness,
economic performance, and political stability.
Investor Demand: Strong demand from investors because of T-Bills' short maturity and liquidity, which
makes them a preferred cash management tool.

German Bunds

Long-term debt securities issued by the Federal Republic of Germany.

Maturity: Ten and thirty years are common maturities.
Interest Payments: Interest is paid on a yearly basis.
Risk: Because of Germany's solid credit rating and steady economy, it is regarded as extremely low-risk.
2019 saw a moderate issuance volume, which was indicative of steady economic conditions.
• 2020: Higher issuance in support of fiscal stimulus plans.
• 2021–2022: High issue volumes will be maintained to fund recovery initiatives.
• 2023: Germany pursued fiscal stability, and issuance levels stayed constant.
Interest Rates and Yields: • 2019: The strong demand for safe assets resulted in persistently negative
yields.
• 2020: Due to pandemic uncertainty, negative yields persisted.
• 2021–2023: As the European Central Bank modified its monetary policy, yields gradually increased.
Credit Ratings: Germany's solid budgetary situation and economic stability are reflected in its AAA
rating.
Investor Demand: Demand from investors has been consistently strong, with Bunds being regarded as a
standard for low-risk assets in Europe.
Japanese Government Bonds (JGBs)

Debt securities issued by the government of Japan.

Maturity: A range of times, usually between two and thirty years old.
Interest Payments: Interest is paid on a semi-annual basis.
Risk: Because of the Japanese government's support, this project is regarded as low-risk.
Volume of Issues: 2019: Consistent issuance in line with Japan's current economic strategies.
• 2020–2021: Increased issuance to boost the economy and pay for pandemic-related expenses.
• 2022–2023: Continued high-volume issuance in support of structural reforms and economic recovery.
Interest Rates and Yields: • In 2019, the ultra-loose monetary policy of the Bank of Japan (BOJ) kept
yields close to zero.
• 2020: In line with the BOJ's ongoing monetary stance, yields stayed close to zero or negative.
• 2021–2023: Yields increased somewhat as the BOJ modified its yield curve control strategy, but rates
stayed extremely low in comparison to peers throughout the world.
Credit rating: Despite having a high debt-to-GDP ratio, Japan's credit rating is high (A+) according to
S&P, which reflects the country's size and fiscal capacity.
Investor Demand: • Japan's institutional investors, especially pension funds and insurance firms, are
driving strong domestic demand for dependable returns in a low-interest environment.

Sources of Information/Data
1. US Department of the Treasury - Offers extensive information on the issue and yields of US Treasury
bonds and T-Bills.
2. Information and analysis on the issuance and performance of Sukuk are provided by the Islamic
Financial Services Board (IFSB).
3. German Finance Agency - Offers information on yields and German Bund issuance.
4. Japanese Ministry of Finance: Provides information and analysis on the issuance and yields of Japanese
government bonds.
5. Bloomberg: Current financial information on international debt instruments, such as credit ratings,
issuance volumes, and yields.
6. Reuters - News and information on financial markets, encompassing movements in debt instruments
and investor conduct.
7. Rating Agencies - Credit ratings and analytical studies on different debt issuers are provided by
Moody's, PACRA, S&P and Fitch.

Articles Related to the Topic

A number of academic studies and business reports shed light on how particular debt arrangements are
changing over time. Prominent references include of:
1. "US Treasury Market in the Post-Pandemic Era" - This article analyzes how the US Treasury market
has changed, focusing on the effects of monetary policy changes and fiscal stimulus.
2. "The Rise of Sukuk: Sharia-Compliant Financing" - Examines how Sukuk has expanded and gained
recognition around the world as a respectable substitute for traditional bonds.
3. "Short-Term Debt Instruments: The Role of T-Bills in Liquidity Management" - Examines how
Treasury bills are used to finance immediate government requirements and manage liquidity.
4. The article "German Bunds: Safe Haven Amidst Economic Uncertainty" explores the significance of
German Bunds as a low-risk investment option in times of economic turbulence.
5. "Japanese Government Bonds: Stability in a Low-Yield Environment" - Examines how JGBs
stand out from the competition and appeal to investors in a low-yield climate that is here to stay.

Conclusion and Recommendations

Conclusion:
A few significant trends are highlighted by the examination of particular global debt instruments during
the last few years:
1. US Treasury Bonds: The US government's fiscal policies and the state of the economy are reflected in
the high issuance volumes and steadily rising yields. These bonds continue to be the foundation of secure
investment portfolios.
2. Sukuk: The demand and issuance of Sharia-compliant bonds are growing, indicating a global debt
market that is becoming more diversified and meeting the needs of Islamic finance.
3. Treasury Bills: The fact that T-Bills are still in high demand highlights their importance in short-term
finance plans and liquidity management.
4. German Bunds: Due to their low risk nature, German Bunds are in high demand and are a valuable
addition to both European and international investment portfolios.
5. Government Bonds issued by Japan (JGBs): JGBs are characterized by persistently low yields and
robust domestic demand, which is indicative of Japan's distinct monetary policy and economic conditions.

Recommendations:
1. Diversification: To balance risk and return, investors should incorporate a variety of various debt
instruments in their portfolios.
2. Monitoring Monetary Policy: Since interest rate movements and central bank policies have a big
influence on yields and investing strategies, keep up with them.
3. Pay Attention to Credit Quality: Give priority to issuers with good credit ratings to reduce the chance
of default, particularly during erratic economic times.
4. Investigating Sustainable Investments: Take into account raising your contributions to green and
sustainable bonds, especially Sukuk, which support long-term social and environmental objectives.

Investors can more adeptly traverse the changing terrain of international debt instruments by
comprehending these developments and modifying their investment strategy accordingly.
Contribution of Each group member:

Taha Ahmed (55164):

 Introduction
 Articles related to the topics
 Data analysis of T bills, Sukuks, Japanese Government Bonds (JGBs).
 Recommendations

Rabia Haneef (59563):

 Data analysis of US treasury bonds, German Bunds
 Sources of Info/ Data
 Conclusion