Bonds

A Concise Guide for Investors

By: Moorad Choudhry

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Hardcover | 22 August 2006 | Edition Number 1

At a Glance

Hardcover
192 Pages

Edition Type
Annotated

Dimensions(cm)
22.86 x 15.24 x 1.27

Hardcover

$84.99

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Bonds are a vital part of the global capital markets and are essential for any investor's portfolio. In this book leading expert Moorad Choudhry demystifies bonds once and for all. This guide explains, in a simple, clear fashion, the importance of bonds and why all private investors should include them as part of their investment strategy. Many bonds offer secure returns at a lower risk than equities. Readers will gain insight into the advantages of holding bonds and why they should always form part of any savings portfolio. Covering, among other topics, government bonds, the yield curve and what drives the market, in an easy, accessible style, this book is a must for anyone who wants to adopt a sound investment strategy.

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List of figures	p. xi
List of tables	p. xiii
Foreword	p. xv
Preface	p. xix
Getting to the starting point	p. 1
Bonds: important for you	p. 1
A simple product	p. 2
Interest rates	p. 4
A big market	p. 5
Relevant for equity investors	p. 5
Bonds: important for everyone	p. 6
Bonds and the global economy	p. 9
Bonds and equities: showing the value in bonds	p. 10
A summary to finish the first chapter	p. 13
Notes	p. 14
Bond basics	p. 17
Description	p. 17
Type of issuer	p. 19
Term to maturity	p. 19
Principal and coupon rate	p. 19
Currency	p. 20
Bond issuers	p. 20
Types of bonds	p. 22
Conventional bonds	p. 22
Government bonds	p. 22
Floating rate notes	p. 23
Index-linked bonds	p. 23
Zero-coupon bonds	p. 23
Corporate bonds	p. 23
High yield bonds	p. 24
Eurobonds	p. 24
Bonds with embedded options	p. 24
Bond warrants	p. 24
Asset-backed securities	p. 25
The queasy stuff: price and yield	p. 25
Financial arithmetic	p. 25
Pricing bonds	p. 28
Bond yields	p. 31
More queasy stuff: a (thankfully!) brief word on duration	p. 39
Revisiting the bond price/yield relationship	p. 39
Duration	p. 40
Properties of duration	p. 43
Using Microsoft Excel to calculate bond yield and duration	p. 44
Notes	p. 46
The UK gilt market	p. 47
Introduction and history	p. 48
Market Instruments	p. 49
Conventional gilts	p. 49
Index-linked gilts	p. 50
Double-dated gilts	p. 52
Floating rate gilts	p. 53
Gilt strips	p. 53
Undated gilts	p. 53
Treasury bills	p. 54
Maturity breakdown of stock outstanding	p. 54
Market trading conventions	p. 54
Investing in gilts	p. 55
Taxation	p. 56
Resident private investors	p. 56
Overseas investors	p. 57
Market structure	p. 57
Market makers	p. 57
The role of the Bank of England	p. 59
Issuing gilts	p. 59
Auction procedure	p. 61
Conversions	p. 63
Gilt strips	p. 64
Market mechanics	p. 64
Pricing convention	p. 65
Interest rate risk for strips	p. 66
Usefulness for private investors	p. 66
List of gilt stocks outstanding, 30 September 2005	p. 67
Related gilt market websites	p. 69
Notes	p. 69
Investing in non-UK government bonds	p. 71
Overview of government markets	p. 71
The primary market in government bonds	p. 71
The secondary market in government bonds	p. 74
Germany	p. 74
Introduction	p. 74
Volumes and issuance	p. 75
Market structure	p. 76
Italy	p. 78
Market structure	p. 79
Primary and secondary markets	p. 80
France	p. 81
The primary market	p. 81
The secondary market	p. 83
OAT strips	p. 84
Euro-zone information sources	p. 84
The US Treasury market	p. 85
Introduction	p. 85
Treasury dealing by private investors	p. 85
Notes	p. 86
Corporate bonds, Eurobonds and credit quality	p. 87
Corporate bonds	p. 88
Introduction	p. 88
Basic provisions	p. 90
The primary market	p. 91
The secondary market	p. 93
Fundamentals of corporate bonds	p. 93
Bond security	p. 95
Call and refund provisions	p. 95
PIBS: a sterling investor's favourite	p. 96
Corporate bond risks	p. 97
Credit risk	p. 99
Liquidity risk	p. 100
Call risk	p. 100
Event risk	p. 101
High yield corporate bonds	p. 102
Eurobonds	p. 103
Basic structure	p. 103
Floating rate notes	p. 104
Zero-coupon bonds	p. 105
Credit ratings	p. 105
Some basics	p. 106
Notes	p. 108
Understanding and appreciating the yield curve	p. 111
Introduction	p. 111
What is the yield curve?	p. 112
Using the yield curve	p. 114
Setting the yield for all debt market instruments	p. 114
Acting as an indicator of future yield levels	p. 115
Measuring and comparing returns across the maturity spectrum	p. 115
Indicating relative value between different bonds of similar maturity	p. 115
Pricing interest-rate derivative instruments	p. 115
Yield to maturity yield curve	p. 116
Yield curve shapes	p. 116
Now the caveat	p. 116
Analysing and interpreting the yield curve	p. 118
Theories of the yield curve	p. 119
The expectations hypothesis	p. 119
Liquidity preference theory	p. 122
Segmentation hypothesis	p. 123
Humped yield curves	p. 125
The flat yield curve	p. 125
Further views on the yield curve	p. 126
Using the yield curve as a private investor	p. 129
The zero-coupon yield curve	p. 130
A hairy bit	p. 133
Notes	p. 135
References	p. 136
Dealing for the private investor	p. 137
Dealing in bonds	p. 137
Dealing language	p. 137
Dealing mechanics	p. 138
Stockbrokers	p. 138
Types of stockbroker	p. 138
Choosing a broker	p. 140
Picking suitable bonds	p. 140
Income versus capital gain	p. 142
Taxation issues	p. 142
Notes	p. 143
Glossary	p. 145
Further reading	p. 163
Useful websites	p. 165
Table of Contents provided by Ingram. All Rights Reserved.

Bonds

A Concise Guide for Investors

At a Glance

Hardcover

Shipping

How to return your order

Defective items

You Can Find This Book In

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