Chapter18BondFundamentals(投资分析与投资组合管理).pptx

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1、Lecture Presentation Software to accompanyInvestment Analysis and Portfolio ManagementSeventh Editionby Frank K. Reilly & Keith C. BrownChapter 18Chapter 18Bond FundamentalsQuestions to be answered: What are some of the basic features of bonds that affect their risk, return, and value? What is the c

2、urrent country structure of the world bond market and how has the makeup of the global bond market changed in recent years?Chapter 18Bond Fundamentals What are the major components of the world bond market and the international bond market? What are bond ratings and what is their purpose? What is th

3、e difference between investment-grade bonds and high-yield (junk) bonds?Chapter 18Bond Fundamentals What are the characteristics of bonds in the major bond categories such as governments (including TIPS), agencies, municipalities, and corporates? How does the makeup of the bond market in major count

4、ries such as the United States, Japan, the United Kingdom, and Germany differ?Chapter 18Bond Fundamentals What are the important characteristics of corporate bond issues developed in the United States during the past decade such as mortgage-backed securities, other asset-backed securities, zero-coup

5、on and deep discount bonds, high-yield bonds, and structured notes?Chapter 18Bond Fundamentals Within each of the major bond categories, what are the differences between major countries such as the United States, Japan, the United Kingdom, and Germany How do you read the quotes available for the alt

6、ernative bond categories (e.g., governments, municipalities, corporates)?Basic Features of a Bond Pay a fixed amount of interest periodically to the holder of record Repay a fixed amount of principal at the date of maturityBasic Features of a Bond Bond market is divided by maturity Money Market - sh

7、ort-term issues that mature within one year Notes - intermediate-term issues that mature between one and ten years Bonds - long-term obligations with maturity greater than ten years Remaining life (maturity) affect price volatilityBond Characteristics Intrinsic features Coupon - yield (interest inco

8、me) Maturity - term or serial (municipalities) Principal value - different from market value Type of ownership - bearer or registered Types of Issues Secured (senior) bonds Unsecured bonds (debentures) Subordinated (junior) debenturesBond Characteristics Indenture provisions Features affecting a bon

9、ds maturity Callable (call premium) Noncallable Deferred call Nonrefunding provision Sinking fundRates of Return on Bondsti,ti,1ti,ti,PIntPHPRwhere:HPRi,t = the holding period for bond i during the period tPi,t+1 = the market price of bond i at the end of period tPi,t = the market price of bond i at

10、 the beginning of period tInti,t = the interest payments on bond i during period tThe holding period yield (HPY) is:HPY = HPR - 1The Global Bond-Market Structure Participating issuers 1. Federal governments 2. Agencies of the federal government 3. State and local political subdivisions (municipaliti

11、es) 4. Corporations 5. International issues Foreign bonds EurobondsParticipating Investors Individual investors Institutional investors Life Insurance Companies Commercial Banks Property and Liability Insurance Companies Pension Funds Mutual Funds Bond Ratings Ratings Services1. Duff and Phelps2. Fi

12、tch Investors Service3. Moodys4. Standard & Poors Non-rated bondsAlternative Bond IssuesDomestic government bonds United States - T-bills, notes, bonds. TIPS Japan - medium term, long term, super long term Germany - bund bonds, contract with Kassenverien liquid market provided by Bundesbank United K

13、ingdom - short gilts, medium gilts, long giltsGovernment Agency IssuesUnited StatesNot direct issues, but backed by “full faith and credit of the U.S. governmentGNMA pass-through certificatesJapanGovernment associate organizationsGermanyFederal Railway and Federal Post OfficeMunicipal Bonds General

14、obligation (GO) bonds Revenue bonds Interest payments are exempt from federal income tax Convert the tax-free yield of a municipal bond selling close to par to an equivalent taxable yield (ETY)Equivalent Taxable YieldWhere:i = coupon rate of the municipal obligationsT = marginal tax rate of the inve

15、stor)-(1ETYTiMunicipal Bond Guarantees Bond insured against default risk Insurance is irrevocable for the life of the issue Four private bond insurance carriers Municipal Bond Investors Assurance (MBIA) American Municipal Bond Assurance Corporation (AMBAC) Financial Security Assurance Financial Guar

16、anty Insurance Company (FGIC)Municipal Bond Guarantees Insured bonds obtain AAA (Aaa) ratings Issues with private guarantees have more active secondary market, and lower required yieldCorporate Bonds Mortgage bonds Collateral trust bonds Equipment trust certificates Collateralized mortgage obligatio

17、ns (CMOs) Other asset-backed securities (ABS) Variable rate notesCorporate Bonds Zero-coupon and deep-discount bonds Minicoupon bonds Original-issue discount (OID) bonds Taxes due on the implied interest High-yield bonds (speculative bonds and junk bonds) Noninvestment grade with rating below BBB or

18、 BaaJapanese Corporate Bond Market Bonds issued by industrial firms or utilities Minimum issuing requirements are specified by the Ministry of Finance Bonds issued by banks to finance loans to corporation Commercial banks Long-term credit banks Mutual loan and savings banks Specialized financial ins

19、titutionsGerman Corporate Bond Market Bank bonds German mortgage bonds German commercial bonds Private Loan Agreements (Schuldscheindarlehen)U.K. Corporate Bond Markets Debentures Unsecured loans Convertible bondsInternational Bonds Foreign bonds are sold in one country and currency by a borrower of

20、 a different nationality Yankee bonds are U.S. dollar denominated bonds sold in the U.S. but issued by a foreign firm Eurobonds are underwritten by international bond syndicates and sold in several national marketsInternational Bonds United States Yankee bonds register with SEC Eurodollar bond marke

21、t affected by changes in value of U.S. dollarInternational Bonds Japan Samuri bonds - yen denominated issued by non-Japanese firms in Japan Euroyen bonds - yen denominated, sold outside JapanInternational Bonds Germany DM-denominated bonds issued by foreign companies are EurobondsInternational Bonds

22、 United Kingdom Bulldog bonds are sterling-denominated bonds issued by non-English firms and sold in London Eurosterling bonds are sold in markets outside London by international syndicatesObtaining Information on Bonds Less emphasis on fundamental analysis Most bond investors rely on rating agencie

23、s for credit analysis Market and economic conditions Intrinsic bond features Popular publications available: Wall Street Journal, Barrons, Business Week, Fortune, Forbes, Federal Reserve Bulletin, Survey of Current BusinessBond Publications Treasury Bulletin Standard & Poors Bond Guide Moodys Bond R

24、ecord Moodys Bond Survey Fitch Rating Register Fitch Corporate Credit Analysis Fitch Municipal Credit Analysis Investment Dealers Digest Credit Markets Duff & Phelps Credit Decisions The Bond PlayerSources of Bond Quotes Bank and Quotation Record The Blue List of Current Municipal Offerings Wall Str

25、eet Journal BarronsInterpreting Bond Quotes Quoted on basis of yield or price Price quotes are percentage of par 98 1/2 is not $98.50 but 98.5% of par A municipal $5,000 bond quoted at 98 1/2 would be $4,925Corporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7.7 52 1053/8 + 1/4Corporat

26、e Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7.7 52 1053/8 + 1/4Issued by AT&TCorporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7.7 52 1053/8 + 1/4Issued by AT&T8.125% coupon rateCorporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7.7 52 1053/8 + 1/4Issued

27、by AT&T8.125% coupon ratematures in 2022Corporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7.7 52 1053/8 + 1/4Issued by AT&T8.125% coupon ratematures in 2022Current yield = coupon/market price = 7.7%Corporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7.7 52 1053/8 + 1/4I

28、ssued by AT&T8.125% coupon ratematures in 2022Current yield = coupon/market price = 7.7%52 of these bonds traded that dayCorporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7.7 52 1053/8 + 1/4Issued by AT&T8.125% coupon ratematures in 2022Current yield = coupon/market price = 7.7%52 of

29、 these bonds traded that dayThe closing price was 105 3/8% of parCorporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7.7 52 1053/8 + 1/4Issued by AT&T8.125% coupon ratematures in 2022Current yield = coupon/market price = 7.7%52 of these bonds traded that dayThe closing price was 105 3/

30、8% of par which was up 1/4 from the prior dayCorporate Bond Quotes Notations “cv = convertible “zr = zero coupon “dc = deep discount (at time of issue) Accrued interest must be added to price quotedTreasury and Agency Bond Quotes Notations “n = treasury note “p = treasury note on which nonresident a

31、liens are exempt from withholding taxes on interest Quotes resemble OTC securities with bid and ask pricesTreasury and Agency Bond QuotesGOVT. BONDS & NOTES Maturity AskRate Mo/Yr Bid Asked Chg. Yld. 55/8 Dec 99n 100:08 100:10 . 5.04Treasury and Agency Bond QuotesGOVT. BONDS & NOTES Maturity AskRate

32、 Mo/Yr Bid Asked Chg. Yld. 55/8 Dec 99n 100:08 100:10 . 5.04Prices are in 32nds usually with a very small spread between bid and askTreasury and Agency Bond Quotes U.S. Treasury Strips “ci is the coupon interest portion stripped from the note “np is the principal payment for the treasury note Treasu

33、ry Bills Pure discount instrument - there is no coupon, they pay par at maturity The bid-ask is not the price but the yieldMunicipal Bond Quotes200 INDIANA ST OFFICE BLDG COMMN MBIA 0.000 07/01/05 5.60 BEARSTERQuote from The Blue List of Current Municipal Offerings$200,000 of Indiana State Office Bu

34、ilding bondsGuaranteed by MBIAThese are zero coupon bonds due July 1, The yield to maturity is given as 5.6%To determine the price you compute the discount valueThe dealer offering the bonds is Bear Sterns, listed in the back of the publication with their phone numberMunicipal Bond Quotes Notations

35、ETM = escrow till maturity M/S/F = mandatory sinking fund (C97) = this bond became callable in 1997 When the market yield equals the coupon rate, the price is 100 and they are referred to as dollar bonds “+ in the left column indicates a new item “# before yield to maturity or price indicates a changeThe InternetInvestments OnlineEnd of Chapter 15Bond FundamentalsFuture topicsChapter 19 The Analysis and Valuation of Bonds