Issuance and Trading of Government and Corporate Fixed-income Instruments
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…
Funding Choices: Sovereign & Non-sovereign Governments, Quasi-government Entities, and Supranational Agencies
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,…
Long-term Corporate Debt: Investment-grade (IG) Vs. High-yield (HY) Bonds
AnalystPrep Summary Investment-grade bonds are issued by financially stronger companies and typically carry credit ratings of BBB-/Baa3 or higher. High-yield bonds, also called speculative-grade or junk bonds, are rated below investment grade. Because investors face greater default risk with high-yield…
Repurchase Agreements (Repos)
AnalystPrep Summary A repurchase agreement, or repo, is a secured short-term financing transaction in which one party sells securities while agreeing to repurchase them later at a higher price. The difference between the sale price and the repurchase price represents…
Short-term Funding Alternatives
AnalystPrep Summary Short-term funding allows corporations and financial institutions to meet immediate liquidity needs through bank borrowing, commercial paper issuance, deposits, interbank markets, and central bank funding. Non-financial companies typically choose funding sources based on cost, flexibility, collateral requirements, reliability,…
Primary and Secondary Fixed-income Markets
AnalystPrep Summary Primary fixed-income markets allow governments, corporations, and other issuers to raise capital by issuing new bonds. Secondary fixed-income markets allow investors to trade existing bonds after issuance. Primary markets include public offerings, private placements, auctions, and underwriting arrangements….
Types of Fixed-income Indexes
AnalystPrep Summary Fixed-income indexes track the performance of groups of bonds and serve as benchmarks for portfolio managers and investors. They can represent broad bond markets or focus on specific sectors, credit qualities, maturities, geographic regions, currencies, or ESG criteria….
Fixed-income Segments, Issuers, and Investors
AnalystPrep Summary Fixed-income securities are commonly classified by time to maturity, issuer type, and credit quality. These classifications help investors compare bonds based on liquidity, interest rate risk, default risk, income needs, and investment objectives. The fixed-income market includes securities…
Legal, Regulatory, and Tax Implications on Fixed-income Securities
AnalystPrep Summary Legal, regulatory, and tax considerations influence how fixed-income securities are issued, traded, priced, and taxed. Bonds may be classified as domestic bonds, foreign bonds, Eurobonds, or global bonds depending on the issuer, market, currency, and regulatory jurisdiction. Investors…
Fixed-income Cash Flow Structures and Contingency Provisions
Introduction Fixed-income cash flow structures determine when investors receive interest and principal payments. Contingency provisions determine whether those cash flows may change in the future. Common structures include bullet bonds, fully amortizing bonds, partially amortizing bonds, floating-rate notes, zero-coupon bonds,…
