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34 Cards in this Set
- Front
- Back
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What is the difference between series and serial bonds?
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Series = MATURE on same date (issued on differing dates)
Serial = MATURE on differing dates (issued on same dates) |
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What bonds are quoted on dollar?
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- Corp
- Gov - Term Muni |
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What bonds are quoted on a yield basis (bps)
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- Serial Muni
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A call feature on a bond sets a ____________ on the market price
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ceiling
(interest rates drop, prices go up, but only so far [ceiling]) |
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Bond/Yield Movements
YTC>YTM>CY>Coupon (Discount) Opposite (Premium) |
draw pic
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Normal Yield curve
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- ascending
- loosened - expansion |
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Flat Yield curve
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- tightened
- peaking |
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Inverted Yield curve
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- severely tightened (short term rates)
- overheating |
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Yield spread:
Widening ( sells corp bonds --> buys gov bonds) |
- flight to quality
- coming recession |
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Yield spread:
Narrowing (Buys corp bonds --> sells gov bonds) |
- coming expansion
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what settles in a clearinghouse?
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- Corp bonds ('C')
- Munis (think of GO --> house -- 'H') - Equity |
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How do Gov bonds settle?
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FICC (fixed income clearing corp)
- are fed funds |
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How do corp bonds accrue interest?
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30/360
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What trades flat?
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- defaulted
- income bonds - zero - commercial paper |
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claim priority in liquidation:
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- Secured
- tax - debenture - Subord - pref - common |
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Treasury Bonds:
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- 30 year
- multiples of $100 - 32nds - callable (5 years prior) |
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STRIPS
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- strips off coupon
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Treasury Receipts
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- greater liquidity risk
- AAA - extremely volatile (zero coupon) - obsolete since STRIPS - coupons are stripped and sold |
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Treasury Notes
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- 1 to 10 yrs
- pay interest - 32nds - non-callable |
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Treasury Bills
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- 1, 3, 6, 12 month
- issued at discount - yield basis quote |
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what is extension risk
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that maturity will be longer than expected
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PAC - Planned Amort Class
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- principal payments made later than expected applied here
- more certain maturity than Companion - protects against BOTH prepayment and extension |
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Companion Class
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- principal payments made ABOVE what is expected is applied here
- HIGH level of prepayment risk - HIGH level of extension risk (if rates rise) |
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TAC - Targeted Amort Class
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- pays target amount of principal
- protects AGAINST prepayment risk, but DOES NOT protect against extension risk |
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what is the denom of CMO
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1K
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Where does gov and agency debt trade?
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OTC
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When fed loosens credit, it ___________ treasurys, causing rates to go _____________
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- BUYS
- DOWN |
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when fed tightens credit, it ___________ treasurys, causing rates to go _______________
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- SELLS
- UP |
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Gov accrue:
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ACT/ACT
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Agency accrue:
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30/360
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Legal opinion looks for:
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- validity
- legality - tax exempt status |
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legal opinion must be:
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UNqualified
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Rev Bonds
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Self supporting
(fees, rents, grants, excise, non-valorem tax) |
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Rev bond Flow of Funds:
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1) Rev fund
2) operation and maintenance 3) sinking fund 4) debt service RESERVE fund 5) RESERVE maintenance fund 6) renewal and replacement 7) surplus fund |
