CS计算机代考程序代写 Introduction to Fixed Income Markets

Introduction to Fixed Income Markets

Introduction to Fixed Income Markets
Coupon
Yield
Principal
Issued at par 100
1/32nds or 0.01s of 100
Bond prices – secondary markets
2x size of Equity markets
USD issuance dominates

US Debt markets

2013 data

The creation and use of a yield curve is one of the most vital aspects in a nation’s economic and financial development
A yield curve line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year and 30-year government debt.

A yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates. The curve is also used to predict changes in economic output and growth.

A nation’s yield curve provides a remarkably reliable indicator for current – and future – economic conditions

– It represents the collective knowledge of all financial participants.

Central bank changes of the overnight rate forces responses in the banking process

Those responses lead to other – often predictable – responses (eg, when short rates rise to a point where it becomes more expensive to borrow than to lend)

Let’s now take a look at some of those sorts of changes…

Corporate curve
%
Time
1 yr 2yr 3yr 5yr 7yr 10y 30y
12

10

8

6

4

2

Government curve

“AA” rated
“A” rated

The “spread”

Yield curve
%
Time
1 yr 2yr 3yr 5yr 7yr 10y 30y
12

10

8

6

4

2

“Flat” curve
“Normal” Curve
“Steep” curve

“Inverted” Curve

US Treasuries – Bloomberg screenshot

8

Treasury Bond Price Quotes
in the U.S (Hull p.157-162)
Cash price = Quoted price + accrued interest (coupons)

IC301
9

9

Treasury futures contracts summary

10

https://www.cmegroup.com/education/files/understanding-treasury-futures.pdf

10

Quotation practices

11

US Treasury auction cycle

12

10 year USTs – Bloomberg snapshot

13

On the run and off the run securities

14
Rolls and liquidity

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