Par Rates A par rate is the yield-to-maturity that equates the present value of a bond’s cash flows to its par value (typically \(100\%\) of face value). Spot rates play a pivotal role in determining par rates. For a bond…

Spot Rates Spot rates are the market discount rates for default-risk-free zero-coupon bonds. Unlike typical bonds that offer periodic interest payments, these bonds are sold at a discount and repaid at face value upon maturity. Sometimes referred to as “zero…

Money market instruments are short-term debt securities with original maturities of one year or less. They are a crucial part of the financial market and include a variety of instruments such as overnight sale and repurchase agreements (repos), bank certificates…

Floating Rate Instruments Floating-rate instruments, such as floating-rate notes (FRNs) and most loans, differ from fixed-rate bonds in their periodic payment dynamics. Their interest payments fluctuate based on a reference interest rate, ensuring the borrower’s base rate remains aligned with…

Sovereign vs. Corporate Debt Issuance Process There is a clear distinction between corporate and sovereign debt issuance processes. Corporate debt issuance tends to be opportunistic and is managed by investment bank underwriters on behalf of the issuers. On the other…

National or Sovereign Government Issuers National governments possess the sovereign authority to derive tax cash flows from economic activities within their jurisdiction. In contrast, private sector issuers depend on operating cash flows and alternative repayment sources, such as asset sales,…

Corporate issuers use long-term debt to secure stable funding for a range of requirements, from short-term operations to long-term capital investments. However, the features and availability of such funding vary based on the credit quality of the issuer. While IG…

Repurchase agreements, commonly known as repos, serve as a secured method for short-term borrowing and lending. These transactions consist of a seller committing to repurchase a security at a predefined price on a future date. This operation essentially allows the…

Short-term funding is key for corporations to meet immediate cash needs, maintain liquidity, and capitalize on supplier discounts. Short-Term Funding Alternatives for Non-Financial Institutions External Financing Non-financial entities can acquire immediate liquidity through various banking avenues: Uncommitted Lines of Credit…

Primary Fixed-Income Markets Primary bond markets are where issuers sell new bonds to investors to raise capital. This contrasts with secondary bond markets, where existing bonds are traded among investors. Debut issuers are those who approach the bond market for…