Faure A.P. Bond Market: An Introduction

Quoin Institute; Bookboon, 2013. — 137 p.The debt market is usually categorised into the short-term debt market (STDM) and long-term debt market (LTDM), and includes marketable and non-marketable debt. The money market is comprised of the STDM and the deposit market (which is overwhelmingly of short duration). The bond market is the marketable arm of the LTDM. Bonds are issued by governments (all levels), companies and special purpose vehicles, and there are many types and many risks to holding them. The bond market is an important asset class, yielding returns second to equities. The bottom end of the bond yield curve reflects money market rates (which reflect monetary policy) and its longer end reflects the shorter end, expectations in respect of the shorter end (which includes future inflation), as well as confidence.Context & Essence
Learning outcomesThe financial system in brief
The money market in a nutshell
Essence of the bond market
Essence of the plain vanilla bond
Bond derivativesIssuers & Investors
Learning outcomesThe economics of long-term finance
Issuers of bonds
Government debt and fiscal policy
Investors in bondsInstruments
Learning outcomesBond instrumentsOrganisational structure
Learning outcomesRisks in, and shortcomings of, OTC markets
Advantages of exchange-driven markets
Primary market
Secondary marketMathematics
Learning outcomesPresent value / future value
Annuities
Plain vanilla bond
Perpetual bonds
Bonds with a variable rate
CPI bonds
Zero coupon bonds
StripsTools
Learning outcomesOther yield measures
Duration
LCC per basis point
The yield curve (term structure of interest rates)Endnotes