Global Fixed Income markets 

Friday 7th of august
Mpr is just tomorrow, and we have a lot to do. I got to the office quite early, and was told to come observe something, then I was given many to do. I would have finished early but because the person who sent the report that I had to work on made different copies of the same branch and when sorting it out, it brought out many copies. Unknown to me,I just counted the branches and they were 25 in all and I didn’t know that two of them had multiple entries under different names. For example, one is named cro plateau and then plateau.

I sorted it with excel, and you know that with excel it is garbage in garbage out like any other computer program. Then I later found out they were 22 instead of 25. I had to start sharing them again based on 22. Then my supervisor came in and told me that it is not necessary and since they sent rubbish to me, we would share anything we dimmed fit to them.

It took me a long time to do, and I was tired eehn. Then I read something on fixed income securities. Just a note guys, because i am getting very busy, I would not be doing the daily update as I use to. I would be coming once in a while to do a recap of all I have learnt. Please do enjoy this topic.

Classifications of global fixed income markets.

Fixed income securities can be classified in a number of factors which includes:

a) Type of issuer: Bonds for example can be categorized based on the type of issuer such as government issued bonds, corporate bonds by organizations which can be further classified into corporate bonds by financial corporations and corporate bonds by non-financial corporations.

The largest issuers by total value of bonds outstanding in global markets are financial corporations and governments.

b) Credit quality: Credit rating agencies such as Augusto & co in Nigeria, standards & poor, Moody’s, Fitch in Usa and others around the globe provide credit ratings on bonds. The credit ratings are AAA and AA for high credit quality investment grade , AA and BBB for medium credit quality investment grade, BB,B,CCC,CC, C for low credit quality (non-investment grade) or junk bonds and D for bonds in default for non payment of principal or interest.

c) Original Maturities: Bonds are classified based on their term to maturity, securities with original maturities of one year or less are classified as money market securities, and securities with original maturities of more than one year are referred to as capital market securities.

d) Coupon structure: Bonds are classified as either floating or fixed rate bonds. Floating rate bonds are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a quoted spread. Fixed rate bonds are bonds with a fixed coupon rate as opposed to floating rate bonds.

e) Geography: Bonds may be classified by the market in which they are issued. For example domestic bonds issued by native companies in their own country, foreign bonds issued by foreign companies in another country, euro bonds are issued outside the jurisdiction of any one country and are denominated in a currency different from the countries in which they are sold. Global Bonds which are bonds that trade in the national bond market of a variety of countries, other than the country that issues the currency the bond is denominated in.

f) Currency denomination: A bond’s price and returns are determined by the interest rates in the bond’s currency.

g) Tax status: In countries, bonds may be issued, exempt from income taxes. The trade off is that the yield from tax exempt bonds are lower than that of non- tax exempt bonds or taxable bonds of similar risk and maturity.

 

Recommended Reading 

Frank Fabozzi., Martin Leibowitz., Fixed Income Analysis