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22 Cards in this Set
- Front
- Back
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What factors make the US Treasury prominent?
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1. volume
2. liquidity |
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Are Treasury Securities subject to state and local income taxes?
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No
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What is the difference between Treasury Notes and Treasury Bonds?
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Treasury Notes- maturities between 2 and 10 yrs
Treasury Bonds- maturities greater than 10 yrs |
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What are Treasury inflation protection securities (TIPS)?
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securities that adjust for inflation; principal is adjusted for inflation then coupon is taken as percentage of inflation adjusted principal; each adjustment is taxed; principal cannot fall below par value
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What is the stop yield?
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highest yield accepted by the treasury in a securities auction
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What is the tail?
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the difference between the average yield of all the bids accepted by the Treasury and the stop yield; the smaller the tail, the more successful the auction
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What does off-the run mean?
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initially issued before, not a recent bond
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What is the when-issued market/wi market?
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treasury securities are traded prior to the time they are issued by the Treasury
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What is the difference between an overnight repo and a term repo?
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government securities dealer purchases security and needs financing before it sells the security-
overnight repo- loan to dealer is for one day term repo- loan for more than one day |
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What is a matched sale?
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Fed sells securities draining money from the financial market
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What is coupon stripping?
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firm buys T-bond sells securities against each coupon payment + the maturity payment; each sold security is a zero coupon bond; Merrill Lynch- Treasury Income Growth Receipts (TIGRs)/Salomon Brothers- Certificates of Accrual on Treasury Securities (CATS)
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What are trademark zero-coupon Treasury securities?
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investment banks issue their own zero-coupon bond; rarely traded, not very liquid, risky cause bank may go bankrupt
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What are Treasury receipts?
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represent ownership of a strip (coupon payment or principal) of a Treasury security
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What is the Separate Trading of Registered Interest and Principal of Securities program?
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facilitates stripping of designated treasury securities
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What is the difference between coupon strips and principal strips?
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coupon strips- created from coupon payments
principal strips- created from the principal |
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What is a negative of coupon strips?
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negative cash flow because interest is taxed eventhough interest is not paid
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What is reconstitution?
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process of purchasing stripped Treasury securities to create synthetic Treasury coupon securities
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What are federally related institutions?
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arms of federal government that generally do not issue securities directly in the market place
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What are government-sponsored enterprises (GSEs)?
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privately owned, publicly chartered entities; issue securities directly to farmers, homeowners and students
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What are the two types of securities issued by GSEs?
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debentures and mortgage/backed/asset-backed securities
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What are debentures?
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do not have any specific collateral backing the bond; ability to repay depends on the ability of the issuing GSE to generate sufficient cash flows to satisfy the obligation
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What do you call bonds in the UK?
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gilts
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