Topic 5 Fixed-Income Markets for

Government Issuers

Question 1
Edit
Which type of issuers are distinguished by their legal authority to establish
and maintain a country’s public goods and services, as well as their ability
to tax economic activity in their jurisdictions?
answer choices
Quasi-government entities
Sovereign government issuers
Non-sovereign government issuers
Private sector issuers
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Question 2
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What are the characteristics of developed market sovereign issuers?
answer choices
Primarily issue debt in restricted domestic currency
Strong, stable, well-diviversified domestic economy
Dependence on a dominant domestic industry
Higher growth but less stable and less well-diversified economies
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Question 3
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What is the primary form of issuance for sovereign debt?
answer choices
Online auctions
Public auctions
Private auctions
Direct placements
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Question 4
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Why do investors of US dollar–denominated external sovereign debt still
face exposure to currency risk?
answer choices
Sovereign fixed-income securities are denominated in freely floating
domestic currencies
The issuer’s credit rating may be downgraded
The issuer must be able to generate foreign currency revenue
The issuer relies on state-owned enterprises
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Question 5
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What is the main benefit of issuing longer-term sovereign government
securities?
answer choices
Greater fiscal instability
Higher borrowing costs
Increased liquidity across maturities
Reduced market efficiency
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Question 6
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What is the primary reason for the US Treasury to stop issuing 30-year
Treasury bonds in October 2001?
answer choices
Concerns about inflation
Increased demand for shorter-term securities
Reduced need for future borrowing
Global economic crisis
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Question 7
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What is the primary method of issuance for corporate debt?
answer choices
Public auctions
Investment bank underwriters
Direct placements
Online auctions
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Question 8
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What is the main difference between the issuance of government and
corporate fixed-income instruments?
answer choices
Corporate debt is issued through direct placements
Government debt is issued through public auctions
Corporate debt is issued through public auctions
Government debt is issued through investment bank underwriters
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Question 9
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Balance sheets of government entities are unlikely to include:
answer choices
FX reserves
long-term debt
short-term investments
accrual of unfunded liabilities
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Question 10
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In practice, which of the following applies as it relates to sovereign
government financing?
answer choices
Taxpayers smooth consumption over time, saving expected future taxes
today for future payment
Taxpayers expect tax rates to remain constant over time, leading to stable
government revenue
Taxpayers form rational expectations that today’s tax cuts will result in
future tax increases and pass on tax savings to descendants
Governments seek to minimize interest rate and rollover risks by
distributing debt across maturities while issuing debt in regular, predictable
intervals
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Question 11
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Which of the following is correct regarding the single-price auction process?
answer choices
All non-competitive bids are accepted, while competitive bids are ranked
starting at the lowest yield (highest bond price)
Bidders are required to submit sealed bids without knowing the bids of
other participants
Bidders include only dealers and institutional investors
Competitive bidders who bid higher than the stop yield are allocated
securities
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Question 12
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On-the-run sovereign debt securities are:
answer choices
only available for purchase by institutional investors
issued prior to off-the-run securities
used for benchmark yield analyses
less liquid than off-the-run securities
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Question 13
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A non-sovereign bond issued to fund public goods and services in the non-
sovereign’s limited jurisdiction that is repaid from local tax cash flows is
referred to as:
answer choices
an agency bond
a revenue bond
a GO bond
a municipal bond
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Question 14
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Government agencies issue debt that is:
answer choices
at a yield-to-maturity equal to that of its sovereign guarantor
primarily repaid by cash flows related to its underlying activities
short term, only to meet working capital and capital investment needs
issued at a discount to attract more investors
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Question 15
Edit
Balance sheets of government entities are unlikely to include:
answer choices
short-term investments
accrual of unfunded liabilities
long-term debt
FX reserves