Breakeven Analysis
What Is Breakeven Analysis? Breakeven analysis helps determine the level of output or sales at which a firm’s total revenue equals its total cost. At the breakeven point, economic profit is zero because the firm earns just enough revenue to…
Yield Spread Measures for Money Market Instruments
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…
Yield Spread Measures for Floating-rate Instruments
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…
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….
