Fixed Income Securities:

Defining Elements
Basic Features of Fixed Income
Securities
Fixed Income Securities:
Defining Elements
Basic Features of Fixed
Income Securities
1.Overview of Fixed
Income
2. Bond Features
 Fixed Income Security

BOND
Issuer

Maturity Date
1 Bond
Face / Par Value
Features Coupon Rate / Freq

Currency

2
*Contingency Legal,
3 Provisions Regulatory
, Tax
Considerations r
Lender
er
Borrowe
Bondholder Bond Issu

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
 Issuance
Bond Features
BOND
Issuer Government Sector

Maturity Date ✦ Supranational (World Bank, IMF)

Face / Par Value
Coupon Rate / Freq
Currency
✦ Sovereign national governments (US, Singapore)
✦ Non-sovereign (local) governments (California, Toronto)
✦ Quasi-government (Fannie Mae, govt agencies)
Corporate Sector
✦ Financial (banks, insurance companies)
✦ Non-financial

Structured Finance Sector

Borrower
✦ Special legal entities (create ABS) Bond Issuer

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
BOND As short as 1 day
Issuer As long as 30 years
Maturity
Maturity Date Issuance Date

Face / Par Value Term to maturity / Tenor

Coupon Rate / Freq

Currency

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
BOND Perpetual
Issuer bonds

Maturity Date Issuance No maturity

Face / Par Value 1 yr

Coupon Rate / Freq

Money Capital
Currency market market
securities securities

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
Premium to Par
BOND
103 = $1030
Issuer
Bond
Trading at Par $1000
Maturity Date price

Par Value
Discount to Par principal amount
Face / Par Value Face value that will be repaid
Maturity at maturity
Redemption
value value
Coupon Rate / Freq Issuance Principal
value
Currency
Maturity
Date

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
BOND
Issuer
2-year bond, X% coupon 100
Maturity Date Annual Payments

Par Value
Face / Par Value

Coupon Rate / Freq X% X X

Yr
Currency 0 1 2
Maturity
Date

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
BOND
Issuer
2-year bond, X%
Maturity Date coupon
Semi-Annual Payments

Par Value
Face / Par Value

Coupon Rate / Freq X% X X X X

Yr
Currency 0 2 12 2 22
Maturity
Date

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
BOND
Issuer
2-year bond, X% coupon
Maturity Date Quarterly Payments

Par Value
Face / Par Value

Coupon Rate / Freq X% X X X X X X X X

Yr
4 4 4 4 4 4 4 4

Currency 0 1 2
Maturity
Date

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
BOND
Issuer
2-year bond, X% coupon
Maturity Date Monthly Payments

Par Value
Face / Par Value

Coupon Rate / Freq X% X X X X X X X X X X X X X X X X X X X X X X X X

12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12

Yr
Currency 0 1 2
Maturity
Date

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
✦ USD denominated bond
BOND Less risk to lenders
Issuer Both interest and principal in USD
Indonesia US$
🇮🇩
Maturity Date

Par Value
Face / Par Value
US$ US$ US$ US$
Coupon Rate / Freq
X X X X
2 2 2 2 Yr
Currency 0 1 2
Maturity
Date

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
✦ USD denominated bond
BOND Less risk to lenders
Issuer Both interest and principal in USD
Indonesia US$
🇮🇩 ✦ Dual-currency bond
Maturity Date Interest payments in currency A
Principal payments in currency B

Par Value
Face / Par Value
IDR IDR IDR IDR
Coupon Rate / Freq
X X X X
2 2 2 2 Yr
Currency 0 1 2
Maturity
Date

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features
✦ USD denominated bond
BOND Less risk to lenders
IDR Both interest and principal in USD
Issuer Indonesia or US$
🇮🇩 ✦ Dual-currency bond
Maturity Date Interest payments in currency A
Principal payments in currency B

Par Value
Face / Par Value IDR IDR IDR IDR ✦ Currency option
or US$ or US$ or US$ or US$ Allows bondholder to pick
Coupon Rate / Freq payment currency
X X X X
2 2 2 2 Yr
Currency 0 1 2
Maturity
Date

Basic Features of Fixed Income

Securities
1. Overview of Fixed 2. Bond
Bond Features Plain Vanilla Bond
BOND $1030 Yield Measures
$1000
+
Issuer
$40
Current Yield
$1000
Maturity Date 2 yrs Annual Coupon

Par Value
Bond price
Face / Par Value $1000
$40 $40 $40 = 80/1030 =
Coupon Rate / Freq
8% Semi-
annual 7.8%
Yr
Currency 0 1 2 Yield-to-Maturity
8.00% IRR on expected CF
4.88% 1030 = 40/(1+r) + 1040/(1+r)2
Yield-to-Maturity
Semi-annual yield, r = 2.44%
Inverse relationship to price Just a quick YTM = 2.44x2 = 4.88%
introduction. You
will learn YTM in YTM factors in $30 loss
greater detail
later.
Basic Features of Fixed Income
Securities
1. Overview of Fixed 2. Bond