Bond Sectors and Bond Instruments by Edu Pristine

Author of lecture Bond Sectors and Bond Instruments

Edu Pristine

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... characteristics and distribution methods for government securities ...

... Tap System: It is also known as sovereign debt. Such securities are considered to be free of default risk. However for a person in the US, the sovereign debt of another country will have credit risk. ...

... Treasury Bills: Maturity of less than one year and do not make interest payment. Issued at discount to par. Treasury Notes: Pay semiannual interest rates. Maturities of 2, 3, 5, 10 years. ...

... Mr. Lee purchased $1million in par-value, semi-annual pay, 3% Treasury Inflation Protection Security (TIPS) on 1st January 2010. The inflation rate over the 1st six months of 2010 was 2% per annum ...

... Principal Securities (STRIPS): Introduced by Treasury in 1985. ...

... Reconstitution Coupon STRIPS: STRIPS created from coupon payments. Denoted by ci Coupon STRIPS: Acrrued Interest is Taxed every year even though interest is not paid until maturity. Thus, they have negative cash flows until maturity. ...

... bonds by clubbing individual cash flows together to create Treasury securities B. Allows dealers to divide Treasury bonds into their coupon payments to create Zero coupon bonds C. This separation and reconstitution of Treasury securities creates an arbitrage in ...

... fixed income analyst is discussing investment strategies with Karen. He says that a $100m, 8%, 10-year semi-annual T-note issued by the US government can be stripped into 20 Treasury strips. The 20th treasury strip is the final coupon and principal strip ...

... The 21st strip is the principal strip of $100m. When Karen disagrees with Carl she is correct regarding ...