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8 Cards in this Set
- Front
- Back
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Treasury Bonds
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o Issued by department of Treasury
o Issued and traded at banker’s discount o 4 week (28 day) issued on auctioned on Tuesday o 13 week(91) and 25 week (182) auctioned on Monday o 52 week (364) auctioned every 4 weeks on Tuesday o All mature on Thursdays |
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Retail market
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dealers do business with customers
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EAR
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Effective Annual Rate
annualized return on investment o $1000 with 10% yield • (1+(.1/2)^2 |
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6 Primary Attributes for determining yield of bond
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o Term to maturity
o Coupon rate o Call provisions o Liquidity o Risk of default o Tax status |
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Expectations Hypothesis
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yield curve reflects short period rates. Inverted yield curve results when interest rates are expected to fall
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Liquidity Preference
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volatility increases as term to maturity increases. Investors require higher yields for longer investments.
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Segmented Market
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Corporations and investors can manage their taxes. Shape of yield curve reflects supply and demand for funds in each segment.
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Benefits of Repo
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-extremely lucrative way to buy securities.
-Essentially owning securities on borrowed money. -No margin requirements, so investors can stock massive amounts of inventory. -Repos are quick and easy as opposed to banks which take additional time losing out on quick investment opportunities |
