6️⃣ Fixed Income
Fixed Income Securities: Defining Elements

Fixed Income Securities: Defining Elements

学习目标

  • Describe
    • describe basic features of a fixed-income security
    • describe content of a bond indenture
    • describe how legal, regulatory, and tax considerations affect the issuance and trading of fixed-income securities
    • describe how cash flows of fixed-income securities are structured
    • describe contingency provisions affecting the timing and/or nature of cash flows of fixed-income securities and identify whether such provisions benefit the borrower or the lender
  • Compare
    • compare affirmative and negative covenants and identify examples of each

基础概念

  • tenor: the time remaining until the bond's maturity date 当前债券距离到期日剩余的时间
  • borrower = issuer: 发债的
  • lender = bondholder = investor: 购买债券的
  • conventional bond = plain vanilla bond: a bond with fixed coupon rate
  • zero-coupon bond = pure discount bond: 不发coupon的bond
  • par Value = face value = nominal value = redemption value = maturity value: 面值 到期之后要还的钱
  • national market: 发行地 = 发行货币(currency)
    • domestic: 发行人 = 发行地
    • foreign: 发行人 != 发行地
  • eurobond: 发行地 != 发行货币
  • global bonds: 同时在多个国家发行债券
  • registered bond: the ownership is recorded by either name or serial number vs. bearer bond: no records of ownership
  • Covenants(条款): legally enforceable rules that borrowers and lenders agree on at the time of a new bond issue.
  • bond indenture:
  • dual-currency bond: coupon in one currency and principal in another currency
  • currency option bond: a combination of a single-currency bond + a foreign currency option
  • affirmative covenant: 必须要遵守的合同条款
  • negative covenants: 被禁止做的合同条款
  • money market: maturity < 1 year
  • capital market: maturity > 1 year
  • perpetual bonds: no stated maturity date
  • securitised bonds: issued by a separate legal entity created for the purpose of owning specific assets e.g. special purpose entities(SPE)
  • secured bonds: have collateral
  • unsecured bonds: no collateral
  • 100bps = 1%
  • LIBOR (opens in a new tab): 1. 单利 2. 360 day / year The London Inter-bank Offered Rate is an interest-rate average calculated from estimates submitted by the leading banks in London
  • callable bond(价格相比no-option的更低 因为对investor更不利): give the issuer the right to buy bonds back prior to maturity, thereby raising the reinvestment risk for the bondholder
  • potable bond(价格相比no-option的更高 因为对investor更有利): gives the bondholders the right to sell the bond back to the issuer at a pre-determined price on specified dates
  • convertible bond(价格相比no-convertible的更高 因为对investor更有力): bondholder有将债权转换为优先股的权利
  • cap vs. floor
    • cap: the upper limit of floating rate
    • floor: the lower limit of floating rate

学习笔记

  • Issuer

    • Supranational organisations: World Bank
    • Sovereign (national) governments: US
    • sovereign (local) governments: Georgia State
    • Quasi-government entities
    • Companies (i.e., corporate issuers)

  • Bond Indenture

    • affirmative covenants
      • comply with laws
      • maintain its current lines of business
      • insure and maintain its seats
    • negative covenants: costly and do materially constrain the issuer's potential business decision
      • restrictions on asset disposals
      • negative pledges
      • restrictions on prior claims

  • Credit enhancement

    • Internal credit enhancement
      • subordination: 分级 MBS中常用
      • overcollateralization: 过度抵押 使用超过bond价值的抵押物
      • reserve accounts
        • cash reserve fund: 单独留一笔cash在违约的时候还钱
        • excess spread:
    • External credit enhancement
      • surety bond: issued by insurance companies
      • bank guarantee:
      • letter of credit
    • Limitation of external credit enhancement: third-party (counterpart) risk -> cash collateral account (CCA): 借一笔钱来专门还债

Bond indenture

  • Issuer
  • Collateral
  • Credit
  • Covenants
  • Tax
    • Interest income
    • Capital gain
    • Original issue discount bonds
      • pure-discount bonds
      • premium bonds

Regulation & Tax

  • Global Bond Market
    • domestic bond(国内债券): 发行地和发行方使用的货币一样，发行人也一样 e.g. 万科在中国发行人民币计价
    • foreign bond(外国债券): 发行地和发行货币一样，发行人不一样 e.g. 沃尔玛在中国发行人民币计价的债券
    • Eurobond: 发行地而发行方使用货币不一样 e.g. 沃尔玛在中国发行美元计价的债券
  • bearer bonds: 监管宽松，受托方不会登记债券所有人的名字，大部分欧洲债券

债券分类

  • Principal repayment structure

    • Bullet: 只在到期的时候偿还本金 entire principal value at maturity
    • Amortising: repay part of principal at each payment date
    • Sinking fund provision
      • advantages: less credit risk
      • disadvantages: more reinvestment risk

  • Coupon payment

    • Fixed-rate
    • Step-up: coupon rate
    • Deferred coupon
    • Floating-rate notes(FRN):
      • coupon rate = reference rate(e.g. LIBOR) + quoted margin
        • coupon rate determined at the coupon reset date 期初决定期末利率 reference是用上一期的
        • 时间频率必须一致
    • Credit-linked: 和信用评级绑定 如果评级下降 要求coupon rate会增加
    • Equity-linked bonds

课后练习

  • Q1: redemption value = face value = par value, 就是最后要还的钱 注意和债券本身的价格进行区分 bond price不是 par value
  • Q4: indenture是合同，covenant是条款 debenture 是unsecured bonds
  • Q6: 对ratio的限制一般都是negative的
  • Q8: national domestic
    • 中国公司在中国发RMB债券，national domestic
    • 美国公司在中国发RMB债券，national foreign
    • 只要发行地和货币不在一个国家 就是euro bond e.g. 在中国发行 日元/美元债券
  • Q9: Eurobonds are most likely to be bearer bonds
  • Q18 题目中implied 指隐含的 pure discount bond 没有支付coupon只是通过价格和par value的差价来获得收益
  • Q24 multiple put bond offers the most benefit to bondholders

关联思考

Equity Valuation: Concepts and Basis ToolsIssuance, Trading and Founding