Chapter 6 Bond Management

fixed income investement

with coupon, interest payment

and payment of the capital amount at expiry (nominal value)

the bondholder has not a part of the company he/she only gives the company money

maturities

issuer

credit rating

securitized or ot (with for example mortage)

mode of interest payment ( fixed or variable —> Libor)

most of the bond traded are fixed interest bonds

anually or semiannually payment structure

no periodic interest payment

discount security

100% redemption on maturity

public debtor ( Government, supra nationals, world bank)

private debtor ( corporates, financials, banks)

authorize the holder to draw fresh stocks or bonds from the issuer with set terms within a certain period of time

constist of the actual bond and warrants

• warrants can be traded seperatly

  
  

guarantees the bond holder to swap the bond into shares

with conversion the bond no longer exist

predetermined conditions in which time the bond can be converted

the conversion rate is also specified

different coupons during the time

two interest rates are chossen / one high and one low

interest incresed or decresed on an annully basis

Aim is to reallocate interest income to tax free price gains

lso known as floaters

setting of the interest on the basis of the euribor 3, 6 or 9 months

in contrary to the normal variable interest floater the reverse floater decrease if the euribor eg. is increasing and vice versa

They effect the bond price (increasing yield reduce the bond price and vice versa)

they influence the reinvestment return (increasing yields improve the reinvestment return)