Bond Markets by Edu Pristine

Author of lecture Bond Markets

Edu Pristine

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Excerpts from the accompanying material

... They may issue the securities in domestic market and/or international market. Public offer Vs a private offer: When an issue is not made to only a select set of people, but is open to the general public and ...

... Foreign bonds, which are domestic bonds issued by foreign borrowers. Examples: Bulldog is a sterling bond issued for trading in the UK market by a foreign borrower. Other equivalent bonds include Yankee bonds (USA), Samurai bonds (Japan), Alpine bonds ...

... (the lead-managers) underwrite the transaction, which means they have taken on the risk of distributing the bonds. If they are not be able to find enough investors, they will have to hold some themselves. Underwriters make their income from the price difference. ...

... Only a few hours are allowed for the borrower to accept or reject the terms. If the bid is accepted, the lead manager purchases the entire bond issue from the borrower. The lead manager then has the option of selling part of the issue to other banks for distribution to investors, or doing so itself. In a volatile market, the lead manager will probably parcel some of the issue to other banks for placement. ...

... When determining the no. of days in b/w 2 dates, include the 1st date but not the 2nd; thus, under the actual/365 convention, there are 37 days b/w 4 Aug & 10 Sep. The last 2 conventions assume 30 days in each month ...

... 2nd, default can result in a reorganisation of the firm within a formal legal framework. 3rd, default can lead to an informal negotiation b/w shareholders & creditors. This results in an exchange offer through which shareholders propose to creditors the exchange of their old debt securities for a package of cash and newly issued securities. ...

... yield spread over the government; yield curve is a function of the market’s view of the credit risk of the issuer (for which formal credit ratings are usually used) and the perception of the liquidity of the issue. The lower the rating ...