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What Are Bonds? A bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders.

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Presentation on theme: "What Are Bonds? A bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders."— Presentation transcript:

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2 What Are Bonds? A bond is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) and repay the principal at a later date Wikipedia.com

3 My definition Kind of a loan between Government/Corporation and an Investor who pays to finance their current needs.

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5 Bonds classification concerning interest rate Fixed Rate Bonds Floating Rate Notes Convertible Bonds Zero Coupon Bonds

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7 The US government’s bonds Treasury bills Treasury notes Treasury bonds

8 Notes vs Bonds Treasury notes Treasury notes as medium-term obligations Maturity: 2, 3, 5, or 10 years Besides a payment of face value at maturity, T- notes also pay semiannual coupons. Treasury bonds Treasury bonds are long-term obligations with much longer original-issue maturities. For instance 30 years

9 Govermnent and Corporate bonds Marketable securities from the U.S. government - known collectively as Treasuries They are issued as Treasury bonds, Treasury notes and Treasury bills (T-bills). Corporate Bonds A company can issue bonds just as it can issue stock. Large corporations have a lot of flexibility as to how much debt they can issue

10 Comparison Yield Corporate bonds - slightly better returns than Treasuries Volatility Corporates contain some of the same risks that stocks do. Maturity Similiar possible options for both of them. Liquidity Both are characterised by liquidity

11 Bond rating A bond rating is a grade given to bonds that indicates their credit quality Bond ratings are expressed as letters ranging from 'AAA', which is the highest grade, to 'C' ("junk"), which is the lowest grade.

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13 Junk Bonds A junk bond is a colloquial term for a high- yield or non-investment grade bond. Junk bonds are fixed-income instruments that carry a rating of 'BB' or lower by Standard & Poor's, or 'Ba' or below by Moody's. Junk bonds are so called because of their higher default risk in relation to investment- grade bonds.

14 Thanks for the attention Maciej Dubaj


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