Bond Markets

Terms in this set (9)

Yield to maturity

Issuer's cost of financing with bonds

Bond issued by the US government through an auction.

Stripped Treasury Bonds

Cash flows of treasury bonds are commonly transformed (stripped) by securities firms into separate securities.

Treasury Inflation Protected Securities. Provide returns tied to the inflation rate Intended for investors who wish to ensure that the returns on their investments keep up with the increase in prices over time

Like t bonds, but for small investors. Can be purchased for as little as $25.

Federal Agency Bonds

Fannie Mae and Freddie Mac issue bonds and use the proceeds to purchase mortgages in the secondary market.

Municipal Bonds

State and local government issued bonds. General obligation bonds or revenue bonds. General obligation bonds are supported by the municipal governments ability to tax, whereas payments on revenue bonds must be generated by revenues of the project (toll way, toll bridge, state college dorm, etc.)

Credit risk of municipal bonds

Both types of municipal bonds have some degree of default risk. Municipal bonds have rarely defaulted

Corporate bonds

Can be placed with investors through a public offering or a private placement.

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