Fixed Income Securities

United States of America

 Table of contents

1 Overall prospects of G-sec in USA

2 T-bill and 10 year Bond

3 Bond valuation

4 Participants in the Bond market

5 Types of Instruments

6 Trade Mechanism & platforms

7 Considerations for investment

 Overall prospects of G-sec in USA

Returns of Bond & Equity

6.00% 3.00

4.00% 2.50

2.00% 2.00

0.00% 1.50

-2.00% 1.00

-4.00% 0.50

-6.00% 0.00
Returns on S&P Yield on bond

Bond market vs. Equity market

• The Treasury bonds - 1917 22%

Treasury Debt
Mortgage-related bonds
• Equity market vs. Bond market 45% Corporate bonds

• The Stock market crisis 1998 and the Treasury Bonds 14%
Municipal bonds
stocks
• Fixed income securities before and after Sub-prime crisis
• The size of Bond market and its segregation 6%
13%

Source: treasury.gov.com
www.finance.zacks.com
www.thestreet.com
www.sec.gov
 T-bill and 10 year Bond

Price to yield movement Yield Spread

4.50
3.5 $1,040 4.00
Yield to 3.50
3 $1,020 3.00
maturit
2.5 $1,000 y 2.50
2.00
2 $980 1.50
1.5 $960 Coupon 1.00
Rate 0.50
1 $940 0.00
0.5 $920

18

18

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18

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19
Present

01

01

01
20

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20

20
20

20

20
/2

/2

/2
Value

1/

1/

1/
1/

1/

1/

1/

1/

1/

1/

1/

1/

1/
0 $900

/1
/1

/1
6/
1/

2/

3/

4/

5/

7/

8/

9/

1/

2/

3/

4/
11
10

12
Corporate Government

Price movements of 10y bond & 1y bond

1040
1020
1000
980
10 y
960
940 1y
920
900
18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18 18
/ 20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20 /20
2 9 7 4 1 7 4 2 1 8 5 2 9 6 3 0 7 4 1 8 5 4 1 8 5 2 0 7 4 1 7 4 1 8 5 2 9 6 3 1 8 5 1 8 6 6 3 1 8 6
1/ 1/ 1/1 1/2 1/3 2/ 2/1 2/2 3/ 3/ 3/1 3/2 3/2 4/ 4/1 4/2 4/2 5/ 5/1 5/1 5/2 6/ 6/1 6/1 6/2 7/ 7/1 7/1 7/2 7/3 8/ 8/1 8/2 8/2 9/ 9/1 9/1 9/2 10/ 0/1 0/1 0/2 11/ 11/ 1/1 1/2 12/ 2/1 2/1 2/2
1 1 1 1 1 1 1 1
Source: treasury.gov.com
Fred.stlouisfred.org
 Bond valuation

Company Face Value Coupon Issue Date Tenure Issue price

Alphabet Inc. 1000 3% Semi annual 2/25/2016 10 years 999.8

Coupon date 8/25/2016 2/28/2017 8/31/2017 2/28/2018 8/31/2018 2/28/2019

Present Value 1097 1050 1057 1016 1014 1026

YTM 1.1% 1.4% 1.3% 1.6% 1.6% 1.5%

Coupon date 2/28/2019 Settlement date 5/3/2019

Maculay Duration 4.28
Full Price 1026 Full Price 1031
Flat Price 1026 Flat Price 1025
Modified Duration 4.21
Accrued interest 0 Accrued interest 6

Source: treasury.gov
www.marketinsider.com
 Participants in the Bond market

Issuers Issuers

Government bonds
Government Federal Banks
Municipal bonds

Agency FREDDIE MAC, FANNIE MAE, GINNIE MAE Corporate bonds

Corporate
international bonds
Corporate Walt Disney, Apple, etc.

Intermediaries

Dealers Deutsche Bank, JP Morgan, etc.

Brokers AVA Trade, London capital group, etc.

Source: ww.cbonds.com
 Participants in the Bond market
Buyers

Retail Buyers Individuals

Financial Institutions Commercial Banks, AIG, etc

Platforms
OTC
Exchange New York stock exchange, NASDAQ

Regulators
Securities Exchange Commission
Financial Industry Regulators Authority
Treasury Department Bureau of the Public Debt
 Treasury Bill Savings Bond

Zero percent certificate

Treasury Note
of indebtedness
Types of
Instruments
Government account
Treasury Bond
series

TIPS Coupon stripping

 Trade Mechanism & platforms

Over the Counter Online

Primary markets Secondary markets Primary markets Secondary markets

Federal bank or • Usually not Exchanges

Dealers & primary
authorized financial accessible for • NASDAQ
market issuers
institutions general public • NYSE
• Usually traded on
OTC
Public Announcement Public Trading platforms
Announcement/ via • Liquid net
calling • Bloomberg
Bidding
1. Non-competitive 2. • Market axess
Competitive
Determining the Bid • Tradeweb
and Ask price

Determining the Traded at full price &

Transfer quoted at flat price
Winning Bids
 Tax
Advantages

Capital
appreciatio Safety
n Considerations
for
investment

Income Time
needs horizon
THANK YOU