INDEX
Page numbers in italic indicate figures and tables.
4% Consolidated Loan 36
32nds 70
144a securities 136
ABCP see asset-backed commercial paper (ABCP)
ABS see asset-backed securities (ABS) acceptance commission 301 acceptance credit see banker's acceptances
Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) 227, 228
administrative receivers 125 affirmative covenants 126
Africa 93-5,211-12, 235 agency bonds 97, 102 agency MBS 395
American-style callables 121 amortisation period 389 amortising structures 388-9 announcement day 141 annual yield 15-16, 339 annuities 319-20, 320, 329-31
Apple 105-6, 156-7, 214
Approved Group of Investors
40, 50
Argentina 85, 86 arranging banks 274
Asia 143-5
see also China; Japan; Malaysia asset-backed commercial paper (ABCP) 276, 277
asset-backed securities (ABS) 383-6 see also Islamic bonds
‘at best' 50
auctions
corporate bonds 141
government bonds
France 71
Germany 75
Japan 78
United Kingdom 37-41, 40
Treasury bills
United Kingdom 263-6, 264-6
United States 67, 268-9, 269
Australia 168-9, 251-2
Aviva 112
backup lines 275-6
balloon interest 17
bank-discount basis see discount yield bank loans 8
Bank of England 43, 43, 263, 423-4, 435, 442, 447-8, 456
Bank of Japan 456
Bank of New York Mellon 290, 292 banker's acceptances 21, 297, 300-3, 302, 379-80
Bankers' Clearing House 422-3 banker's promissory notes 422 banking
capital management 424-5, 431-4 history of 419-24
liquidity management 424, 425-31 money creation 420-2, 421, 437-40
see also banks
bankruptcy see insolvency bankruptcy-remote securities 387
banks 18,20, 105, 215
arranging 274 correspondent 298 investment 134-6 shadow 289-90 see also banking; central banks
Barclays Bank 114
basis points (bps) 19
BBA see British Banking Association (BBA)
bearer bonds 124, 213
benchmark interest rates 8, 15, 75, 119, 240-1, 284-8, 458
see also bond indices; interbank interest rates
benchmark securities 63, 64, 72, 136
Bermudan-style callables 121 best-efforts basis 14, 135, 271 bey (bond equivalent yield) 323-4,
365-6, 367, 373
bid prices 38
bid to cover ratio 39, 40,264, 265 bilateral repos 281
bills of exchange 21, 297-300, 299, 378 bills of lading 298
Birmingham City Council 97
Bobls 75
bond default rates 173-4, 173,174
bond equivalent yield 323-4, 365-6, 367,
373
bond funds 17, 51
bond indentures 126
bond indices 59-60, 59, 145, 146
bond insurance 97
bond markets
primary 6
corporate bonds 134-6
United Kingdom gilts 37-41, 40,
50
US government bonds 67 secondary 6, 8-10, 11-13 corporate bonds 105-10, 111 -15, 114-16
Eurobonds 206, 221
United Kingdom gilts 38-9, 50-1
US government bonds 70-1, 71 size of 10-14, 10 volatility 11-13, 11, 12
bond valuation 8-10, 333-61 convertible bonds 191-2 convexity 352-4, 353, 354 duration 346-52, 347, 349, 351 expectations hypothesis 357-9 government bonds
United Kingdom gilts 38, 45-6
United States 70-1, 71
high-yield bonds 179-80 interest rate risk 351-2 irredeemable bonds 333-4 liquidity-preference hypothesis 359-60 market-segmentation hypothesis 360-1
redeemable bonds 334-8 selling before maturity 339-40 semi-annual interest 340-2 term structure of interest rates 354-61, 355-7
volatility of bond returns 345-6 yield 339
yield to maturity versus rate of return 342-5
bonds 5-17
bearer bonds 124, 213
call options 16-17, 121-2, 128, 133, 220
catastrophe bonds 201-3 contingent convertible bonds (cocos) 195-200
convertible bonds 17, 186-95, 219 coupon rates 8, 17, 45-6, 121, 350-1 covenants 15, 126-7, 182, 194 covered bonds 15, 407-18, 408, 410, 411,413
credit ratings 14, 147-74
bond default rates 173-4, 173, 174 corporate bonds 137, 142,159 crises of confidence 168-73 outlooks 162 bonds (continued) post-rating 162 ranking of bonds 162-3 rating decisions 155-61 rating systems 148-55, 149, 150 ratings tables 165, 166, 167 sovereign credit ratings 61,62, 84, 148-54, 150
unsolicited 161
high-yield bonds 126, 175-86, 350 Islamicbonds 57-8, 226-35,230 issuance 14
legal rights 7
local authority bonds 97-101, 98 maturity 6-7
perpetual bonds 35,36, 122-3, 333-4 principal 6, 8, 17
put options 16, 123, 220 securitised 15
yield 15-16,45-6, 339
zero coupon bonds 6, 17, 56, 124, 346 convertible 195
Eurobonds 220
see also corporate bonds; government bonds; international bonds bons du Tresor 71-2 book-building 41, 140 book-runners 114
see also lead managers
bought deals 135
BP 112
break even inflation 54-5, 55 ‘breaking of the buck' 24
British Banking Association (BBA) 241, 246
broad money 437-40
BTANs 72
BTFs 71
Bubills 75
Bulgaria 208-10 Bulldog bonds 206
bullet bonds 118
bullet structure 17
Bunds 75
Bureau of the Fiscal Service, USA 65 buyouts, leveraged 130, 178, 179,182
Cable & Wireless 113
call premium 121
call risk 133
callable bonds 16-17, 121-2, 128, 133,
220
Canada 206
capital 424-5
capital gains 45-6, 51
capital management 424-5, 431-4 capital to assets ratio 432, 433-4 capped bonds 220
caps 120
cash equivalents 22-3
cash management counterparties 263-4 cash reserves 425, 436, 437 catastrophe bonds 201-3
CBs see convertible bonds
CDs see certificates of deposit (CDs) central banks 419, 430
Bank of England 43, 43, 263, 423-4, 435, 442, 447-8, 456
European Central Bank 403-5, 447 see also monetary policy central clearing houses 22 certificates of deposit (CDs) 18-19, 21, 293-5, 376-8
change of control clauses 130 cheques 422
China 81-3, 83, 143, 451-2 clean prices 42, 52-3, 57 clearing houses 22, 422-3 Clearstream 124 closing of bond issue 141
CMBS see commercial mortgage-based securities (CMBS)
CNAV see constant net asset value (CNAV) money market funds co-lead managers 41, 135, 140 Co-operative Bank 113
cocos 195-200 collared FRNs 120
commercial mortgage-based securities (CMBS) 398
commercial paper (CP) 20, 270-8, 271, 272, 274, 277, 372-3 commercial pledge 125 company health risk 134 compound annualised rate of return 323-4
compound interest 314-16, 316, 325-6 continuous compounding 322 converting rates 322-3 discounting 321
Computershare 50
conduits 276
constant net asset value (CNAV) money market funds 24-6
Consumer Price Index (CPI) 67 contingent convertible bonds (cocos) 195-200
continuous compounding 322 conventional bonds 6 conversion premium 189, 190-1 conversion prices 189, 190, 195 conversion ratio 190 conversion value 191-2 convertible bonds 17, 186-95, 219
see also contingent convertible bonds (cocos)
convexity 352-4, 353, 354
corporate bonds 7, 14-15, 103-46
Asia 143-5
bearer bonds 124 bond indices 145, 146 callable bonds 121-2, 128, 133
China 81
covenants 126-7 debentures 124-6
deep discounted bonds 124 default rates 173-4, 173, 174 electronic trading 107-9 floating-rate notes (FRNs) 119-21, 131 index-linked bonds 132
issue process 134-6, 140-1 mini-bonds 117-18
perpetual 122-3
plain vanilla bonds 118
private placements 136-40
professional support 127-8
puttable bonds 123
registered bonds 124
repayments 128-9
retail investors 110, 111, 114-16, 115 mini-bonds 117-18
risks for investors 129-34
secondary trading 105-10, 111 -15, 114-16
sinking funds 128-9
timetables for issues 140-1
trust deeds 126-7
United States 141-3, 142
unrated 159-61
utilities 105
correspondent banks 298
counterparty risk 22
coupon 6
coupon rates 8, 17, 45-6, 121,350-1
see also zero coupon bonds
covenant light high-yield bonds 182-4 covenants 15, 126-7, 182, 194 cover asset pools 408
cover pool monitor 409
covered bonds 15, 407-18, 408, 410, 411,
413
CP see commercial paper (CP)
credit enhancements 155, 387
credit rating agencies (CRAs) 61, 147, 172
see also Dagong; Fitch; Moody's;
Standard & Poor's
credit ratings
bonds 14,147-74
bond default rates 173-4, 173, 174 corporate bonds 137, 142,159 covered bonds 411-13
crises of confidence 168-73 outlooks 162
post-rating 162 ranking of bonds 162-3 rating decisions 155-61
credit ratings (continued)
rating systems 148-55, 149, 150 ratings tables 165, 166, 167 sovereign credit ratings 61,62, 84, 148-54, 150
unsolicited 161
commercial paper 271-3, 271, 272, 276-7
credit risk 13, 85-9, 87, 129
credit scores 396
credit watch 162
CREST system 50, 284
cross default covenants 127 crossing trade 107 crowdfunding 117-18 currency in circulation 436 currency risk 134 current maturity 19 current yield 15-16, 339
Dagong 147, 148, 149, 150 daily compounding 321 day count convention 266, 363-5, 373,
380
dealer-directed offers 271 dealer's spread 38
debentures 124-6
Debt Management Office (DMO) 33,
43-5,263,264
debt to net assets ratio 127
deep discounted bonds 124 default rates, corporate bonds 173-4,
173,174
default risk 13, 85-9, 87, 129 defensive open market operations 445 deferred callable bonds 121-2 deficit spending 29
DeliveryVersus Payment (DVP) 295 dematerialised form 124
Denmark 409, 410, 411-13 deposit multiplier 437-40, 450
Diageo 3, 4
direct placement 271
dirty prices 53, 57
discount pricing 18, 19
commercial paper 270 discount rate changes see standing lending facility discount window facility 447-8 discount yield 365-6, 367, 373 Disney 142 disposal of assets covenants 127 distributors 114 dividend see coupon rates DMO see Debt Management Office
(DMO)
‘documents against payment' drafts 298
domestic bond markets 11
emerging markets 89-93 domestic currency bonds 29 domestic money markets 21 downside contingent bonds 196 Drexel Burnham Lambert 178 DTCC GCF Repo Indices 285,285, 286 dual-currency bonds 220 duration of bonds 346-52, 347, 349, 351
DVP see Delivery Versus Payment (DVP) dynamic cover pool maintenance 408 dynamic open market operations 445
eBay 214
effective annual rate (EAR) 368 Egan-Jones 172 electronic clearing systems 124 electronic communication networks
(ECNs) 107-9 emerging markets
domestic bond markets 89-93 government bonds 84-5, 84, 89-97 Treasury bills 267-8
Eonia (Euro OverNight Index Average) 254-5, 254
equity 7
return on equity (ROE) 434
volatility 11, 13, 13 equity capital 424-5
equity kickers 176 equity-linked bonds
convertible bonds 17, 186-95, 219
Eurobonds 219
equity warrants 176, 219 equivalent bond yield 323-4, 365-6 Eurex Repo GC Pooling Market 285 Euribor (Euro Interbank Offered Rate) 252-3
Eurobonds 11, 205,206, 210-26 advantages and drawbacks 224 issuance 220-1,221 , 222-3 market development 213-19, 214-16 medium-term notes (MTNs) 225-6 types 219-20
Euroclear 50, 124, 295
Euroclear France 71
Eurocommercial paper 278
Eurocredit 260
Eurocurrency certificates of deposit 295, 377, 378
Eurocurrency deposits 295 Eurocurrency market 21,258-61
Eurodollar market 261
Euronia (Euro Overnight Index Average)
258
Europe
covered bonds 409, 410, 411-15 high-yield bond market 180-1 insolvency 163-5
private placements 137-40 securitisation 398-400, 403-5 see also France; Germany; United
Kingdom
European Central Bank 403-5, 447
European Securities and Markets
Authority 169
European-style callables 121 Eurosecurities 259, 260-1 event risk 129-30 exchange traded funds 51 exchange trading 6 exchangeable bonds 195 expectations hypothesis 357-9
face value 6, 8, 17, 110
fallen angels 177
Fannie Mae 394-5, 397-8
FCA see Financial Conduct Authority (FCA)
Federal funds rate 256-7, 443
Federal Home Loan Mortgage Corporation (FHLMC) 394-5, 397-8
Federal National Mortgage Association (FNMA) 394-5, 397-8
Federal Reserve Bank of New York 169, 285-8, 291-2, 447, 456
fees, underwriting 136
fiat money 422, 423-4 financial bonds, China 81
Financial Conduct Authority (FCA) 110, 117, 128, 131
financial crisis 24, 76-8
Financial Industry Regulatory Authority (FINRA) 141
Financial Services Compensation Scheme 117
Financial Stability Board 289-90
Finland 99
firm commitment basis 135, 271
fiscal agents 127-8
Fitch 147, 149, 172
corporate bonds 142 government bonds 84 sovereign credit ratings 61, 150,
151
fixed charge 124-5
fixed-interest securities 8
see also bonds
fixed-price re-offers 135 fixed-value money market funds see constant net asset value (CNAV) money market funds
flat prices 42, 52-3, 57
flat yield 15-16, 339
floating charge 125
floating lien 125
floating-rate notes (FRNs) 17
collared 120
corporate 119-21, 131
Eurobonds 219
US Treasury 68-9
floor system 457-9, 458, 459 floors 120, 131
Ford Motor Co 141-2, 189-90, 277 foreign bonds 11, 205, 206-10, 206 foreign currency reserves 29, 30 foreign exchange risk 134 foreign investors
China 81,82-3, 83
Japan 79
United Kingdom 43-5, 43
United States 65-6 fractional-reserve banking 420 France
covered bonds 409, 410 government bonds 56, 71-3, 72, 73 local authority bonds 99, 100 local authority issues 20-1 private placements 140
public debt 71, 74
FreddieMac 394-5,397-8
freely callable bonds 122
FRNs see floating-rate notes (FRNs) FTSE bond indices 59-60, 59, 145, 146 full accrual prices 53, 57
FX reserves 29, 30
GC repos 283
gearing ratio covenants 127
Geberit 180
GEMMs (Gilt-edged Market Makers) 37-9, 39, 50
general collateral repos 283
General Electric 271
General Motors 277, 384 general-obligation bonds 98
Germany
covered bonds 409, 410 government bonds 56, 74-5, 74, 76 local authority bonds 99, 100
local authority issues 21
private placements 140
Gilt-edged Market Makers (GEMMs)
37-9, 39,50
gilt-edged securities 32
see also United Kingdom gilts
Gilt Purchase and Sales Service 50
Ginnie Mae 395
global bonds 205
gold standard 424
government bonds 13-14, 29-30,
61-102
Africa 93-5
benchmark securities 63, 64, 72, 136
Bulgaria 208-10
China 81-3, 83
credit ratings 61,62, 84, 148-54, 150 default risk 85-9, 87
emerging markets 84-5, 84, 89-97 during financial crisis 76-8
France 56, 71-3, 72, 73
Germany 56, 74-5, 74, 76
Japan 78-81, 79, 80
open market operations 440-6 spreads 64, 64
United States 11, 65-71, 66, 71
see also local authority bonds; United
Kingdom gilts
Government National Mortgage
Association (GNMA) 395 government-sponsored enterprises
(GSEs) 394-5
see also agency bonds
Great Portland Estates 194
Greece 85, 88
grey market 135
gross issuance 31, 33
gross redemption yield 16
GSEs see government-sponsored enterprises (GSEs)
guaranteed loan stock 127
haircuts 288-90, 376
handle 70
hard currencies 29
Hibor (Hong Kong Interbank Offered Rate) 255
high-powered money 440 high-yield bonds 126, 175-86, 350 HSBC Canada 302-3
hybrid bonds
catastrophe bonds 201-3
contingent convertible bonds (cocos) 195-200
convertible bonds 17, 186-95, 219
ICAP BrokerTec 284
ICE Benchmark Administration Limited (IBA) 246-51,247, 249
ICMA see International Capital Market
Association (ICMA)
IDBs see interdealer brokers (IDBs)
IMF 303-4
impatience to consume 311 income yield 15-16, 339 index-linked bonds
corporate 132
government
Europe 55-6
France 56, 72, 72
United Kingdom 33-7, 34, 35, 38,
39, 53-5, 55
United States 66, 67-8
India 446
industrials 105
see also corporate bonds inflation 53-5, 311
break even 54-5, 55
inflation risk 132
insolvency 162-5
bankruptcy-remote securities 387 banks 424, 431
and debentures 125
and junk bonds 178
interbank deposits 18-19 interbank interest rates 240-58, 240
Eonia 254-5, 254
Euribor 252-3
Euronia 258
Federal funds rate 256-7, 443
Hibor 255
Libor 119, 240-52, 242, 247, 249, 260 prime rate 258
Sibor 255
Sonia 258
Tibor 255
interbank market 239-40, 443 interdealer brokers (IDBs) 38-9, 39 interest calculations
annuities 319-20, 320, 329-31
bond equivalent yield 323-4 compound annualised rate of return 323-4
compound interest 314-16, 316, 325-6
continuous compounding 322 converting rates 322-3 discounting 321
converting rates 322-3
perpetuities 320-1
present values 316-17, 317, 327-8 rates of interest 317-18
simple annualised rate of return 323 simple interest 314
interest rate risk 131-2, 193, 351-2 interest rates
coupon rates 8, 17, 45-6, 121, 350-1 money markets 18, 19, 303-8, 304-7 nominal 313
pure 311
real 313
repo rates 284-8, 284-6, 293, 305, 443,
446
spot rates 357-9
term structure of 354-61,355-7
see also benchmark interest rates; interbank interest rates; monetary policy
interest-withholding tax 212 interest yield 15-16, 339
intermediate bonds see high-yield bonds; medium-dated bonds
international bonds 11, 205-35
Eurobonds 11, 205, 206, 210-26 advantages and drawbacks 224 issuance 220-1, 221,222-3 market development 213-19, 214-16
medium-term notes (MTNs) 225-6 types 219-20
foreign bonds 11, 205, 206-10, 206
Islamicbonds 57-8, 226-35,230
International Capital Market Association (ICMA) 213
International Securities Identification
Number (ISIN) 33, 34
Investec Bank 114
investment banks 134-6
investment grade ratings 148, 149 invoice prices 53, 57
irredeemable bonds 35, 36, 122-3, 333-4 ISIN (International Securities
Identification Number) 33, 34
Islamicbonds 57-8, 226-35, 230 issuer ratings 159
Italy 21, 151
Japan 78-81,79, 80, 99, 456
Japan Finance Organization for
Municipalities (JFM) 99
John Lewis 114
JPMorgan 290, 292
junior debt see subordinated debt junk bonds 126, 175-86, 350
launch of bond issue 140 leadmanagers 41, 114, 134-6, 140-1 lead underwriters see lead managers Leeds City Council 97
Lehman Brothers 24, 168
lender of last resort 424
leverage 16
leverage ratio 433
leveraged buyouts 130, 178, 179, 182 leveraged recapitalisations 179
liar loans 396
Libor (London InterBank Offered Rate) 119, 240-52, 242, 247, 249, 260 liquid reserves 425 liquidations 125, 162-5
see also insolvency liquidity management 424, 425-31 liquidity of markets 6 liquidity-preference hypothesis 359-60 liquidity risk 132, 425 liquidity risk premium (LRP) 132 listing 141 listing agents 128 loan stock 125
guaranteed 127
local authority bonds 97-101,98 local authority issues 20-1 lockout periods, callable bonds 122 London InterBank Offered Rate (Libor)
119, 240-52, 242, 247, 249, 260 London Stock Exchange 51, 107, 110,
111,114-16 longs 6, 34, 35, 38 lots 8, 110 low-grade bonds see high-yield bonds LRP see liquidity risk premium (LRP)
main refinancing rate 447 Malaysia 228, 229, 232-4 Maple bonds 206 marginal lending facility 447 market makers 22, 108, 114
Gilt-edged Market Makers (GEMMs) 37-9, 39,50
market-segmentation hypothesis 360-1 marketability risk 132
Markit bond indices 145, 146 master trusts 389-92 maturity 3
bonds 6-7
corporate bonds 128 covered bonds 411, 411
United Kingdom gilts 33-4, 37, 37,
38
and duration 347-8
maturity (continued)
money market instruments 19 certificates of deposit 293 commercial paper 270
pull to 333
yield to 16, 45-6, 339, 342-5, 349-50, 349
maturity value 6, 8, 17
MBS see mortgage-based securities (MBS) medium-dated bonds 6, 34, 35, 38 medium-term notes (MTNs) 225-6 Microsoft 156-7
Milken, Michael 178
mini-bonds 117-18
mini-tenders 41
monetary base 436-40
monetary policy 434-59
controlling reserves 435-6, 450-5,
453
floor system 457-9, 458, 459 monetary base 436-40
open market operations 440-6 overnight interest rate control 443-6, 444, 445, 452-5, 454
quantitative easing 43, 455-6, 457, 457 required reserve ratio changes 450-2 standing lending facility 447-50, 448, 449, 458-9, 459
money creation 420-2, 421, 437-40
see also quantitative easing
money market funds 24-6
money market securities
banker's acceptances 21,297, 300-3, 302,379-80
bills of exchange 21,297-300, 299, 378
certificates of deposit 18-19, 21, 293-5,376-8
commercial paper (CP) 20, 270-8, 271, 272, 274, 277, 372-3
local authority issues 20-1
yield 18, 19
see also repurchase agreements (repos);
Treasury bills
money market securities valuation 363-80
banker's acceptances 379-80
bills of exchange 378
bond equivalent yield versus discount yield 365-6, 367, 373
certificates of deposit 376-8
commercial paper 372-3
day count convention 266, 363-5, 373 repurchase agreements (repos) 373-6 Treasury bills 366-72
money markets 18-23
discount pricing 18, 19
Eurocurrency market 21, 258-61 interbank market 239-40, 443 interest rates 18, 19, 303-8, 304-7 secondary trading 19
bills of exchange 299-300, 299 commercial paper 272-3, 274 Treasurybills 266-7, 267
see also interbank interest rates money multiplier 437-40, 450 Moody's 147, 149, 172
corporate bonds 142, 177
covered bonds 411-13
government bonds 84
short-term debt 271,271
sovereign credit ratings 61, 150, 151 mortgage-based securities (MBS) 389, 395,399-400
sub-prime crisis 395-8 mortgage bonds 125-6, 395 mortgage debentures 124 MTNs see medium-term notes (MTNs) MTS electronic trading platform 284 multi-dealer electronic trading systems
108
multiple price auctions 37 municipal bonds 97-101, 98
name recognition 159 narrow money 437
National Grid 132
National Savings and Investments, UK 32
near-cash 22-3
negative covenants 126-7 negative pledge 126 negotiable certificates of deposit 294 negotiable securities 7
net worth 424-5 Netherlands 99 New Look 185-6
NIFs see note issuance facilities (NIFs) nominal rates see coupon rates nominal rates of interest 313 nominal value 6, 8, 17, 110 non-agency MBS 395 non-negotiable certificates of deposit 294 non-negotiable loans 239
note issuance facilities (NIFs) 274-6 notes 125
OATs (Obligations Assimilables du
Tresor) 72 offer prices 38 offering day 141 open market operations 440-6 open repos 280 operational standing lending facility 447 opportunity costs 19
Opus plc 275
Order book for Retail Bonds (ORB) 51, 110, 111, 114-16
original-issue high-yield bonds 177 original maturity 19 originate-and-distribute model 397 originate-and-hold model 397 over the counter (OTC) trading 6, 107 overdrafts 7
overnight repos 280
PAOF see post-auctions option facility
(PAOF)
paper money 422, 423-4 par-priced zero coupon convertible bonds 195
par value 6, 8, 17, 110 pass-through rate 383 pass-through structures 388-9 paying agents 127 payment-in-kind (PIK) notes 182, 184-6
permanent capital 424 perpetual bonds 35, 36, 122-3,333-4 perpetuities 320-1 piggyback mortgages 396
PIK (payment-in-kind) notes 182,184-6 placements of bonds 135 plain vanilla bonds 6, 118 poison put provision 130 policy bank bonds, China 81 political risk 134 post-auctions option facility (PAOF) 38 post-rating 162 pre-launch of bond issue 140 pre-payment risk 389 preferential creditors 125 present values 316-17, 317, 327-8 price compression risk 122 prices
clean 42, 52-3, 57
dirty 53, 57
high-yield bonds 179-80 United Kingdom gilts 38, 45-6 US government bonds 70-1,71 see also bond valuation; money market securities valuation
pricing day 141 primary bond markets 6
corporate bonds 134-6
United Kingdom gilts 37-41,40, 50 US government bonds 67
primary credit discount rate 447 primary participants 264 prime grade ratings s ee investment grade ratings
prime mortgages 395 prime rate 258 principal 6, 8, 17 private placement memorandum 137 private placements 14,136-40 prospectuses 136
public debt 29-30, 31,36
France 71, 74
United States 66, 66
see also government bonds
pull to par 333
purchasing power risk 132
pure rate of interest 311
puttable bonds 16, 123, 220
qualified foreign institutional investors (QFIIs), China 81,82, 143
quantitative easing 43, 455-6, 457, 457 quasi-money 22-3
quasi-state bonds 97-101, 98
rate of return
compound annualised 323-4
simple annualised 323
versus yield to maturity 342-5
real rate of interest 313
recapitalisations, leveraged 179 reconstitution of STRIPS 70 recoverability of debt 155 redemption, pull to 333 redemption value 6, 8, 17 redemption yield 16 register of holdings, United Kingdom gilts 50
registered bonds 124
registrars 128
reinvestment risk 133
release of property clauses 125 renminbi-qualified foreign institutional investors (RQFIIs), China 82, 143 reopenings 68
RepoFunds Rate indices 284-5, 284 repurchase agreements (repos) 20, 279-93
generals, specifics and specials 283 haircuts 288-90, 376
open market operations 442-5
repo rates 284-8, 284-6, 293, 305, 443, 446
sell/buy-back 292-3
tri-party repos (TPRs) 290-2
valuation 373-6
required reserve ratio 435, 450-2 required reserves 425, 435-6, 450-2 Reserve Primary Fund 24 reserves, bank 424, 425-31
central bank control of 435-6, 450-5, 453
required 425, 435-6, 450-2 secondary 429
supply and demand of 443-6, 444, 445 vault cash 425, 436, 437
reserves, foreign currency 29, 30 reset days 120
restrictive covenants 126-7
retail investors 25
bond funds 17, 51
corporate bonds 110, 111, 114-16, 115 mini-bonds 117-18
government bonds
Japan 78, 79
United Kingdom 40-1,50-1
United States 70
retained earnings 425
return on assets (ROA) 433-4
return on equity (ROE) 434
reverse floaters 220
reverse repos (RRPs) 281, 287
revolving period 389
revolving structures 389
revolving underwriting facilities (RUFs) 274, 275
RFR see risk-free return (RFR)
riba 226
Rio Tinto 154-5
risk 311
risk-free return (RFR) 311-12
risk premiums 313
risks, corporate bonds 129-34
RMBS (residential mortgage-backed securities) 389
ROA (return on assets) 433-4
ROE (return on equity) 434 rolling over debts 7
Ronia (Repurchase Overnight Index
Average) 284
RRPs see reverse repos (RRPs)
RUFs see revolving underwriting facilities
(RUFs)
running yield 15-16, 339
sale and repurchase agreements see repurchase agreements (repos) Sallie Mae 385
Sampdoria football club 121
Saudi Arabia 229,232-4
Schaetze 75
Scope Ratings 172-3
SDRs see Special Drawing Rights (SDRs) seasonal discount rate 447
SEC see Securities and Exchange
Commission (SEC), USA secondary bond markets 6, 8-10, 11-13 corporate bonds 105-10, 111 -15,
114-16
Eurobonds 206, 221
United Kingdom gilts 38-9, 50-1
US government bonds 70-1,71 secondary credit discount rate 447 secondary money markets 19
bills of exchange 299-300, 299 commercial paper 272-3, 274 Treasury bills 266-7, 267
secondary reserves 429
sector risk 133
Securities and Exchange Commission (SEC), USA 25, 26, 107, 136, 169, 226, 276
Securities Industry and Financial Markets
Association (SIFMA) 142 securitisation 15, 383-417 asset-backed 383-6 covered bonds 15, 407-18, 408, 410,
411,413
Europe 398-400, 403-5
master trusts 389-92
process of 387-94, 388 sub-prime crisis 395-8
United States 394-8, 398, 401-2, 405-7
securitised bonds 15
self-issued bonds 117-18
sell/buy-back 292-3
semi-annual compounding 321 semi-sovereign bonds 97-101, 98 senior debt 126, 162-3, 178
Separate Trading of Registered Interest and Principal Securities see STRIPS serial bonds 128 settlement day 50
Severn Trent 132
shadow banks 289-90
share options 176
shares see equity
sharia law 57-8, 226
shelf MTN programme 226
shorts 6, 34, 35, 38
Sibor (Singapore Interbank Offered Rate)
255
sight drafts 298
signing day 141
simple annualised rate of return 323
simple interest 314
simple yield 15-16, 339
single-dealer electronic trading systems
108
sinking funds 128-9
SIVs see structured investment vehicles
(SIVs)
Sleeping Beauty bond 142
Sonia (Sterling Overnight Index Average)
258
Sony 177
South Africa 235
sovereign bonds see government bonds
sovereign credit ratings 61, 62, 84, 148-54, 150
Spain 56, 409, 410
special collateral repos 283
Special Drawing Rights (SDRs) 303-4
special purpose vehicles (SPVs) 227, 276, 384, 387, 388-9 specials rate 283 specific repos 283 split credit ratings 150 spot rates of interest 357-9 spreads 64, 64 SPVs see special purpose vehicles (SPVs) Standard & Poor's 147, 149, 168-9, 172 corporate bonds 140, 142 government bonds 84 short-term debt 271,272, 276-7 sovereign credit ratings 61, 62, 150,151 standing lending facility 447-50, 448, 449, 458-9, 459 stated income loans 396 step-up convertible bonds 195 STIR (short-term interest rate) products
22 stock-driven transactions 283 stock exchanges 6 corporate bond trading 107, 128 London Stock Exchange 51, 107, 110,
111,114-16
STOXX GC Pooling index 285 STRIPS
United Kingdom gilts 56-7, 57
US Treasury 69-70 structured investment vehicles (SIVs) 276 Student Loan Marketing Association
(Sallie Mae) 385 sub-prime car loans 405-7 sub-prime crisis 395-8 sub-sovereign bonds 97-101, 98 subordinated debentures 125-6 subordinated debt 126, 163 see also high-yield bonds sudden death bonds 196-8 sukuk 57-8, 226-35, 230 supply risk 133 supranational organisations 215 Sweden 99, 101 sweep facility 24 swinglines 275 Swiss Franc Repo Market 285 syndication 41, 135-6,141
T-bills see Treasury bills
takeovers see leveraged buyouts tax risk 133
taxation
Eurobonds 212-13 interest-withholding tax 212
United Kingdom gilts 51, 52
teaser rates 396
tenor see maturity term see maturity term bonds 118 term loans 8 term securities 21 term structure of interest rates 354-61, 355-7
Tesco Bank 114, 115, 116, 132
Tibor (Tokyo Interbank Offered Rate) 255 time deposits 21,293
time drafts 298-9
time value of money 311-13
TIPS see Treasury inflation-protected securities (TIPS)
total writedown bonds 196-8
TPRs see tri-party repos (TPRs) trade bills see bills of exchange Trafigura 122-3 transfer agents 128
Transport for London 97
Treasury bills 20, 263-9
emerging markets 267-8
United Kingdom 263-7, 264-7, 367-71
United States 66, 67, 268-9, 269, 371-2
valuation 366-72
Treasury bonds
China 81
United States 66, 67
Treasury coupon securities 67
Treasury floating-rate notes (FRNs) 68-9
Treasury inflation-protected securities (TIPS) 66, 67-8
Treasury notes 66, 67
TreasurySTRIPS 69-70
TreasuryDirect 65, 67, 268 tri-party repos (TPRs) 290-2 triple A ratings 14, 61, 62 trust deeds 126-7 trustees 126, 127, 129
Turkey 442
UKLA see United Kingdom Listing Authority (UKLA) ultra-longs 34, 35 ultra-shorts 6, 34, 35, 38 underwriting 14
commercial paper 274-6
corporate bonds 134-6
uniform price auctions 37
unit trusts 51
United Arab Emirates 229
United Kingdom
certificates of deposit 294 covered bonds 409, 410
Eurobond trading 206, 212-13, 215 Islamicbondmarket 57-8, 229-34 local authority bonds 97, 101 mortgage-based securities (MBS) 389, 399-400
paper money 423-4
public sector borrowing 31-2, 32 Treasury bills 263-7, 264-7, 367-71
United Kingdom gilts 12, 31-60, 33 bond indices 59-60, 59 cum-dividend 52-3
ex-dividend 53
Gilt-edged Market Makers (GEMMs) 37-9, 39, 50
index-linked 33-7, 34, 35, 38, 39, 53-5, 55
interdealer brokers (IDBs) 38-9, 39 Islamicbonds 57-8
maturity 33-4, 37, 37, 38 mini-tenders 41
perpetual 35, 36
prices 38, 45-6
primary markets 37-41, 40, 50 purchasers of 43-5, 43 quotes 46-50, 47, 48, 49 register of holdings 50 retail investors 40-1,50-1 secondary trading 38-9, 50-1
STRIPS 56-7, 57
supplementary issues 41-2, 42 syndication 41
taxation 51,52
yields 45-6
United Kingdom Listing Authority
(UKLA) 110, 141
United States
agency bonds 102
certificates of deposit 294-5 commercial paper (CP) 276, 277 corporate bonds 141-3, 142 covered bonds 409, 410, 416-17 debentures 125-6
government bonds 11, 65-71,66, 71 high-yield bond market 177, 178,
180
interbank interest rates 256-8 municipal bonds 97-9, 98, 101 paper money 423
private placements 136-7
public debt 66, 66
repurchase agreements (repos) 285-8, 285, 286, 290-2
securitisation 394-8, 398, 401-2, 405-7
shelf MTN programme 226 sovereign credit rating 148, 150 Treasury bills 66, 67, 268-9, 269, 371-2
unrated bonds 159-61 unregistered bonds 136 unsolicited credit ratings 161 upside contingent bonds 196 utilities 105
valuation see bond valuation; money market securities valuation variable net asset value (VNAV) money market funds 24-6
variable-rate notes see floating-rate notes
(FRNs)
variation margin 289 vault cash 425, 436, 437 VNAV see variable net asset value (VNAV)
money market funds Vodafone 22-3, 23, 226
Wholesale Markets Brokers' Association
(WMBA) 258, 284
wipeout cocos 196-8 working capital ratio 127
Yankee bonds 206
yield
bond equivalent yield 323-4, 365-6, 367,373
bonds 15-16, 45-6, 339 discount yield 365-6, 367, 373 money market instruments 18, 19
yield curve inversion 356, 356 yield-hungry investors 182 yield to maturity 16, 45-6, 339,
342-5, 349-50, 349
zero coupon bonds 6, 17, 56, 124, 346
convertible 195
Eurobonds 220
see also Treasury bills