WHAT

and
WHO
WHAT & WHO???

“So cut the headlights, summer's a knife

I'm always waiting for you just to cut to the bone
Devils roll the dice, angels roll their eyes
And if I bleed, you'll be the last to know”
 ANSWER

TAYLOR SWIFT - CRUEL SUMMER

WHAT & WHO???

“Tatlong bilyon, ikaw lang nga ang aking gusto

Pasensiya na kung ngayon ako'y 'di para sa 'yo
Tayo ay papunta na sa 'ting bagong yugto
'Yokong mabuhay sa isang mundong walang tayo”
 ANSWER

ERE - JUAN KARLOS

WHAT & WHO???
“'Cause all of the small things that you do
Are what remind me why I fell for you
And when we're apart, and I'm missing you
I close my eyes and all I see is you
And the small things you do”
 ANSWER

THOSE EYES - NEW WEST

WHAT & WHO???

“ 'Braced myself for the goodbye

'Cause that's all I've ever known
Then you took me by surprise
You said, "I'll never leave you alone" ”
 ANSWER

TAYLOR SWIFT- MINE

WHAT & WHO???

“ 'Di mo alam dahil sa 'yo, ako'y 'di makakain

'Di rin makatulog buhat ng iyong lokohin
Kung ako'y muling iibig, sana'y 'di maging katulad mo
Tulad mo na may pusong bato ”
 ANSWER

PUSONG BATO
- JOVIT BALDIVINO
WHAT & WHO???
“ 'Wag ka nang mawala ('wag ka nang mawala)
'Wag ka nang mawala ('wag ka nang mawala)
Ngayon
Dadalhin kita sa aming bahay
'Di tayo mag-aaway
Aalis tayo sa tunay na mundo”
ANSWER

JOPAY
- MAYONNAISE
WHAT & WHO???
“ Mary had a lover then, he went out to sail again
And when he left her dead and gone, she had nothing to hold on
Mary wants to run away, she no longer wants to stay
Girls like her wait in the dark for someone who will save her
heart”
 ANSWER

BUGAMBILYA
- BELLE MARIANO
WHAT & WHO???

“ Ibuhos na ang beer sa aking lalamunan

Upang malunod na ang puso kong nahihirapan
Bawat patak, anong sarap
Ano ba talaga'ng mas gusto ko?
Ang beer na 'to o ang pag-ibig mo?”
ANSWER

BEER
- ITCHYWORMS
WHAT & WHO???
“ Ang almusal ay sigawan
Ang hapunan natin ay tampuhan
Ang mirienda pagdududa
Pero mahal kita
Wala ng hahanapin pang iba
Handa kong magtiis
Kahit na
Away away away na 'to”
 ANSWER

MARTYR NYEBERA
- KAMIKAZEE
WHAT & WHO???
“ Bahay kubo kahit munti
Mga gulay dito ay sari-sari
Singkamas at talong
Sigarilyas at mani
Sitaw bataw patani”
 ANSWER

BAHAY KUBO
-SYLVIA LA TORRE
BOND
MARKET
PREPARED BY:

GROUP 4
LEARNING
OBJECTIVES
 OBJECTIVES:
At the end of this module you MUST
be able to:
• Identified the main issuers of
bonds and the different types of
bonds they issue. Identified the
main issuers of bonds and the
different types of bonds they issue
BOND • Bonds represent as a contractual promise to the investor in
paying the interest and the principal amount.

MARKET • The bond market is often called the debt market, fixed-
income market, or credit market

• Issuers sell new bonds in the primary market, dealers

resell them to investors in the secondary market
KEY TERMS

Why issues bonds?

 Specific financial-management
strategies

These include the following:

1. Minimizing financing costs

2. Matching revenue and expenses
3. Bonds offer a way of linking the repayment of borrowings
4. Promoting inter-generational equity
5. Controlling risk
6. Avoiding short-term financial constraints
 What are the main types of bonds?
• Corporate bonds
- Corporate bonds are a way for companies to raise capital without having
to issue shares
or seek other forms of financing. Companies sell them directly to
investors at varying maturities, but these offer some flexibility around when
they can be redeemed or when the issuer can pay back the loan. They tend to
be longer- term investments.
• Governments bonds
- is a debt security issued by a government to support government
spending and obligations.
 Corporate bonds

There are two main categories of corporate bonds:

a. Investment-grade corporate bond - It is one from a
company that has stable earnings and is solid financially,
which means investors can expect to get their money
back.
b. High yield or junk bond - A high yield or junk bond
belongs to a company that has a higher risk of defaulting
on its loan payments because of high levels of debt or
variable revenues and earnings
 Government Bonds

Government bonds are considered the safest type to invest in because they
are issued by large, stable, national entities. They used to help fund
government spending and tend to pay periodic interest as well as the bonds
' s face value on the maturity date.

a) Federal -These are bonds issued by a country ' s federal government,

which have the power to print money to pay off their debts, so investors
consider these almost risk free.

b) Provincial or state governments - can also issue debt. These bonds are
also considered to be safe because provincial governments can levy
income and sales taxes to support their debt payments
 Government Bonds
c) Municipal: Cities, towns, counties, and regional municipalities issue
government bonds supported by their property taxes. School boards also
issue bonds, supported by their ability to levy a portion of property taxes
for education.

d) Agency - Many government- related institutions issue bonds, some

supported by the revenues of the specific institutions and some guaranteed
by a government sponsor.

e. Treasury bonds - (T-bonds) are issued by federal governments and have

maturities of more than 10 years. The bondholder will get paid interest
while holding the bond an amount of maturity as well. T bonds, Treasury
bills, Treasury notes, and Treasury Inflation Protected Securities (TIPS) all
fall under the category of treasuries, and are considered the least risky
 Example of bond issue:

Bond Indenture:
Face Value - PAR Value , Maturity Value Stated Rate- Contract Rate, Coupon Rate
Maturity in Years Semi-Annual or Annual Interest Payments
Not in Bond Indenture: Purchase Price or Value of the Bond Market Rate - Effective
Interest Rate, Yield.

Parties to a Bond Issue

Bond Issuer [Corporation or Government Entity]
Bondholder [Investor]
 Parties to a Bond Issue

• Bond Issuer [Corporation or Government

Entity]
• Bondholder [Investor]
What is the relationship between interest rates and bond prices?

• Bond prices and interest rates are inversely related, with

increases in interest rates causing a decline in bond prices.
Learn why interest rates affect the price of bonds, and how
you can take a position on the bond market.
• All else being equal, if new bonds are issued with a higher
interest rate than those currently on the market, the price of
existing bonds will decline as demand for those bonds falls.
Equally, if new bonds are issued with a lower interest rate
than bonds currently on the market, the price of existing
bonds will increase in line with demand.
• The degree to which a bond’s price will change given any
shift in interest rates is calculated by assessing the present
value of the bond’s future cash flows. This is because traders
use a method known as a discounted cash flow to value a
bond according to the future returns that they could expect
What happens to bond prices when interest rates rise?
If a trader currently held a bond with a 5% interest rate, but
a new bond was issued with a 10% interest rate, they would
have to sell their bond at a discount on the secondary market
if they wanted to dispose of their investment.

Clearly, two things happened.

1) The manufacturer first sweetens the offer adds some new
features at the same price.
2) Therefore he gives a discount on the earlier model and
brings down its price from Rs 1 lac. to Rs 95,000 In a manner
of speaking we can then say that the moment the market
makes a BETTER or HIGHER offer at the same price, the
price of the older version goes down
 What happens to bond prices when interest rates rise?
• In the same manner when the market offers
BETTER or HIGHER interest rates, then the
PRICE of OLDER VERSION of bonds with
lower interest rates comes DOWN. Similarly
when interest rates are expected to come down,
prices bonds yielding higher interest rates
would climb up.
• This can be compared to a scenario when a
manufacturer of a car strips down some of its
features in order to maintain prices. In such a
case the original model would be priced at
higher price.
Let' s understand this with a numerical example:
- A bond is issued for Rs.10, 000 for five years with a 5% coupon or interest rate,
paid every six
months. Then interest rates in the market rises to 6%. If you want to sell this
bond, who would buy
it when it is paying 1% below market rates (5% vs. 6%)? You have to sweeten the
deal so that the
buyer gets at least market rate for the bond. You can 't change the interest rate on
the bond. That’ s
fixed at 5%. You can, however change the price you will take for the bond.

Let' s understand this with a numerical example:

- The annual payment of Rs.500 (Rs.10, 000 x 5%) must equal a 6% payment.
Doing the math, you
discover that the face value of the bond must be discounted to Rs.8, 333/- so that
 2. What is the difference between interest rates and rates of return ?
The rate of return - refers to a value that indicates how much return is generated
based on the initial investment made, also called the capital. This rate is expressed as
a percentage and is based on the capital and the annual return, which is the amount
earned over the course of a year.

Interest rate -based on additional amounts paid on a loan that is not part of the
actual loan repayment itself.

RATES OF RETURN AND INTEREST RATE FORMULA AND EXAMPLE:

RoR=((Final Value-Initial Value)/Initial Value)×100

Let's say you invested $10,000 in a stock. After a year, the value of your investment
increased to $11,000. We can use the formula to calculate the rate of return: Final
Value: 11,000 Initial Value: 10,000 (11,000−10,000)/10,000)×100=10%
INTEREST RATE: Interest= P × r × t For example, if you have $1,000 invested in
a savings account with an annual interest rate of 5% for 2 years, the interest earned
would be calculated as: P: 1,000 R: 0.05 T: 2

Interest= 1000×0.05×2 =100

Simple meaning and example: - A rate of return is more general, you can say it is
an economic term. - An interest rate is a financial term and it is always a result of
lending money.

So, if you buy a stock that brings you 10% return a year, it is your rate of return. If
you lend this money to somebody for the same 10%, it is going to be an interest
rate. And additionally, we can say, that interest rate is a rate of return on money
lent.
 3. What is the difference between nominal and real interest rates?

Nominal interest rates (r) are made up of two primary components:

a. expected inflation rate (h)
b. b. and the real interest rate (r*) The real rate of interest is a reward for waiting for the
Nominal rate: r = r* + h (approximation)

Fischer Effect: the true nominal rate is made up of three components: a. the real rate, b. the
inflation rate and
c. the product of real and inflation rates: r = r* + h +(r* ×h) (in decimal points) or (1+r)
= (1+r*) × (1+h)

Example: If you have $ 100 today and lend it to someone for a year at a nominal rate of
interest of 11.3%, you will get back $111.3 in 1 year. But if during the year prices of goods
and services rise by 5%, it will take $105 at year-end to purchase the same goods and
services that $100 purchased at the beginning of the year. What was the real interest rate for
the year? The quick answer: 11.3% - 5% = 6.3%. Approximation: Nominal interest rate –
Understanding Bond Markets
What is the difference between primary and secondary bond markets?

Understanding Bond Markets The bond market is broadly segmented into two different silos: the primary
market and the secondary market. The primary market is frequently referred to as the "new issues" market
in which transactions strictly occur directly between the bond issuers and the bond buyers. In essence, the
primary market yields the creation of brand-new debt securities that have not previously been offered to
the public. When a company issues its shares for the first time to investors, the trade is said to take place in
a primary market. A company usually makes an IPO (Initial Public Offer) when it goes on to sell its shares
for the first time to the public. It is the market where securities like stocks and bonds are created for the
first time for the purpose of issuance.

The public issue is generally of 2 types: • IPO (Initial Public Offering): -This is where an unlisted
company issues its shares to the public for the very first time. • FPO (Follow-on Public Offer): -This
happens when an already listed public company issues further shares to the general investing public.

Secondary Market -securities that have already been sold in the primary market are then bought and sold
at later dates.
What are the economic forces that determine bond prices?

• Interest rates - In general, when interest rates rise, bond

prices fall. When interest rates fall, bond prices rise.

• Inflation - In general, when inflation is on the rise, bond

prices fall. When inflation is decreasing, bond prices rise.

• Credit ratings - Credit rating agencies assign credit ratings to

bond issuers and to specific bonds
THANK
YOU