Debt security: Difference between revisions

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*[[Government bond]]s - issued by sovereigns so existing free of [[capital structure]], logically immune to insolvency, but practically distressingly capable of default (yes we're looking at you Argentina) and of course the [[Who is queen?|“who’s queen?” gambit]]
*[[Government bond]]s - issued by sovereigns so existing free of [[capital structure]], logically immune to insolvency, but practically distressingly capable of default (yes we're looking at you Argentina) and of course the [[Who is queen?|“who’s queen?” gambit]]
*[[Corporate bond]]s
*[[Corporate bond]]s
*[[Structured note]]s — weird &wacky [[securitised derivative]]s, issued outta [[espievie]]s
*[[Structured note]]s — weird & wacky [[securitised derivative]]s, issued outta [[espievie]]s
===By name===
===By name===
Categorisations that will appeal (and occur) only to etiquette freaks — the sort of folk who are jazzed by which side of your plate you take the bun from — and lawyers:
Categorisations that will appeal (and occur) only to etiquette freaks — the sort of folk who are jazzed by which side of your plate you take the bun from — and lawyers:
*[[bond]] - traditionally a fixed rate debt security
*[[bond]] - traditionally a fixed rate debt security
*[[Note]] - traditionally a [[floating rate]] security
*[[Note]] - traditionally a [[floating rate]] security
*[[Medium term note]] - A debt secuyrity issued off a  programme rather than as a stand alone)
*[[Medium term note]] - A debt security issued off a  programme rather than as a stand alone)
===By interest feature===
*[[Fixed rate]] bonds
*[[Floating rate note]]s
*[[Zero coupon note]]s
===By position in the [[capital structure]]===
===By position in the [[capital structure]]===
====[[Senior]]====
====[[Senior]]====
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*'''[[Subordinated note]]''':
*'''[[Subordinated note]]''':
===By funkiness===
===By funkiness===
 
*[[Repackaging]]s - See weird and wacky securities derivatives
*Securitisations
*[[Collateralised debt obligation|Collateralised debt ob —]] DON'T SAY IT YOU ARE NOT ALLOWED TO SAY IT IT IS LIKE VOLDEMORT
{{c|Securities}}
{{c|Securities}}


{{Seealso}}
{{Seealso}}
*[[Security]]
*[[Security]]

Revision as of 14:39, 4 December 2018

“Bond” as explained to my neighbor Phil

A bond (also called a “note”, “MTN” or a “debt security”) is a form of loan. It is like an IOU from a company or a government. Instead of taking one big loan from a bank, a company issues lots of little loans, in the form of bonds to investors. To buy a bond is to lend money to the issuing company, who must repay that money by “redeeming” the bond its stated maturity date. In the good old days, bonds were security-printed certificates with the loan terms and conditions printed on them.

Repayment to bearer: The company will pay principal and interest to the “bearer” of a bond — that is, whoever holds it, and who turns up on the correct payment date and presents the bond to the issuer for redemption.

Interest coupons: If interest is payable, the bond will have coupons — literally, little perforated tabs that you can tear off and present separately — for each interest payment. Hence the expression “coupon” has become synonymous in modern finance with interest.

Transferability: Because the issuer pays whoever holds the bond, this means the bond is negotiable — any bondholder can sell its bond to another investor without the issuer’s permission or knowledge. The issuer doesn't care: it has to redeem the same number of bonds, whoever holds them.

Electronic trading: Nowadays, almost all bonds trade and settle electronically, inside clearing systems, so there are no certificates or coupons, and everything happens in the blink of an eye. But the principle is the same.

Financial concepts my neighbour Phil was asking about when I borrowed his mower.

Index: Click to expand:

Edit A freely transferable financial instrument evidencing indebtedness. Comes in a few different types:

By type of issuer

By name

Categorisations that will appeal (and occur) only to etiquette freaks — the sort of folk who are jazzed by which side of your plate you take the bun from — and lawyers:

By interest feature

By position in the capital structure

Senior

Pari passu

Subordinated

By funkiness

See also