Investment Analysis and Portfolio Management Seventh Edition by
Investment Analysis and Portfolio Management Seventh Edition by Frank K. Reilly & Keith C. Brown
Bond Fundamentals
Fitur dasar dari sebuah Obligasi • Membayar jumlah yang tetap untuk bunga secara berkala kepada pemegang obligasi • Membayar jumlah yang tetap untuk pokok pada tanggal jatuh tempo
Basic Features of a Bond • Pasar obligasi dibagi dengan jatuh tempo - pasar uanag-Isu jangka pendek yang jatuh tempo dalam waktu satu tahun - Catatan - isu jangka menengah yang jatuh tempo antara satu dan sepuluh tahun -Obligasi - kewajiban jangka panjang yang jatuh temponya lebih dari sepuluh tahun • Sisa hidup (jatuh tempo) mempengaruhi perubahan harga
Karakteristik Obligasi • Fitur intrinsik - Kupon - hasil (pendapatan bunga) - Jatuh tempo - istilah atau serial (kota) - Nilai pokok - berbeda dari nilai pasar - Jenis kepemilikan - pembawa atau terdaftar • Jenis Isu - Dijamin obligasi (senior) - Obligasi tanpa jaminan (surat utang) - ditundukan (junior) surat utang
Karakteristik Obligasi • Indenture provisions • Features affecting a bond’s maturity – Callable (call premium) – Noncallable – Deferred call – Nonrefunding provision – Sinking fund
Rates of Return Obligasi where: HPRi, t = the holding period for bond i during the period t Pi, t+1 = the market price of bond i at the end of period t/harga pasar akhir Pi, t = the market price of bond i at the beginning of period t/harga pasar awal Inti, t = the interest payments on bond i during period t The holding period yield (HPY) is: HPY = HPR - 1
Struktur Pasar-Obligasi Global • Participating issuers – 1. Federal governments – 2. Agencies of the federal government – 3. State and local political subdivisions (municipalities) – 4. Corporations – 5. International issues • Foreign bonds • Eurobonds
Participating Investors • Individual investors • Institutional investors – Life Insurance Companies – Commercial Banks – Property and Liability Insurance Companies – Pension Funds – Mutual Funds
Bond Ratings • Ratings Services 1. Duff and Phelps 2. Fitch Investors Service 3. Moody’s 4. Standard & Poor’s • Non-rated bonds
Alternative Bond Issues Domestic government bonds – United States - T-bills, notes, bonds. TIPS – Japan - medium term, long term, super long term – Germany - bund bonds, contract with Kassenverien • liquid market provided by Bundesbank – United Kingdom - short gilts, medium gilts, long gilts
Government Agency Issues United States – Not direct issues, but backed by “full faith and credit” of the U. S. government – GNMA pass-through certificates Japan – Government associate organizations Germany – Federal Railway and Federal Post Office
Municipal Bonds • General obligation (GO) bonds • Revenue bonds • Interest payments are exempt from federal income tax • Convert the tax-free yield of a municipal bond selling close to par to an equivalent taxable yield (ETY)
Equivalent Taxable Yield Where: i = coupon rate of the municipal obligations T = marginal tax rate of the investor
Municipal Bond Guarantees • Bond insured against default risk – Insurance is irrevocable for the life of the issue • Four private bond insurance carriers – Municipal Bond Investors Assurance (MBIA) – American Municipal Bond Assurance Corporation (AMBAC) – Financial Security Assurance – Financial Guaranty Insurance Company (FGIC)
Municipal Bond Guarantees • Insured bonds obtain AAA (Aaa) ratings • Issues with private guarantees have more active secondary market, and lower required yield
Corporate Bonds • • • Mortgage bonds Collateral trust bonds Equipment trust certificates Collateralized mortgage obligations (CMOs) Other asset-backed securities (ABS) Variable rate notes
Corporate Bonds • Zero-coupon and deep-discount bonds – Minicoupon bonds – Original-issue discount (OID) bonds – Taxes due on the implied interest • High-yield bonds (speculative bonds and junk bonds) – Noninvestment grade with rating below BBB or Baa
Japanese Corporate Bond Market • Bonds issued by industrial firms or utilities • Minimum issuing requirements are specified by the Ministry of Finance • Bonds issued by banks to finance loans to corporation – Commercial banks – Long-term credit banks – Mutual loan and savings banks – Specialized financial institutions
German Corporate Bond Market • • Bank bonds German mortgage bonds German commercial bonds Private Loan Agreements (Schuldscheindarlehen)
U. K. Corporate Bond Markets • Debentures • Unsecured loans • Convertible bonds
International Bonds • Foreign bonds are sold in one country and currency by a borrower of a different nationality – Yankee bonds are U. S. dollar denominated bonds sold in the U. S. but issued by a foreign firm • Eurobonds are underwritten by international bond syndicates and sold in several national markets
International Bonds • United States – Yankee bonds register with SEC – Eurodollar bond market affected by changes in value of U. S. dollar
International Bonds • Japan – Samuri bonds - yen denominated issued by non. Japanese firms in Japan – Euroyen bonds - yen denominated, sold outside Japan
International Bonds • Germany – DM-denominated bonds issued by foreign companies are Eurobonds
International Bonds • United Kingdom – Bulldog bonds are sterling-denominated bonds issued by non-English firms and sold in London – Eurosterling bonds are sold in markets outside London by international syndicates
Obtaining Information on Bonds • Less emphasis on fundamental analysis • Most bond investors rely on rating agencies for credit analysis • Market and economic conditions • Intrinsic bond features • Popular publications available: – Wall Street Journal, Barron’s, Business Week, Fortune, Forbes, Federal Reserve Bulletin, Survey of Current Business
Bond Publications • • • Treasury Bulletin Standard & Poor’s Bond Guide Moody’s Bond Record Moody’s Bond Survey Fitch Rating Register Fitch Corporate Credit Analysis Fitch Municipal Credit Analysis Investment Dealers Digest Credit Markets Duff & Phelps Credit Decisions The Bond Player
Sources of Bond Quotes • Bank and Quotation Record • The Blue List of Current Municipal Offerings • Wall Street Journal • Barron’s
Interpreting Bond Quotes • Quoted on basis of yield or price • Price quotes are percentage of par – 98 1/2 is not $98. 50 but 98. 5% of par – A municipal $5, 000 bond quoted at 98 1/2 would be $4, 925
Corporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7. 7 52 1053/8 + 1/4
Corporate Bond Quotes Cur Bonds Yld ATT 81/8 22 7. 7 Issued by AT&T Vol Close 52 1053/8 Net Chg + 1/4
Corporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7. 7 52 1053/8 + 1/4 Issued by AT&T 8. 125% coupon rate
Corporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7. 7 52 1053/8 + 1/4 Issued by AT&T 8. 125% coupon rate matures in 2022
Corporate Bond Quotes Cur Bonds Yld ATT 81/8 22 7. 7 Vol Close 52 1053/8 Net Chg + 1/4 Issued by AT&T 8. 125% coupon rate matures in 2022 Current yield = coupon/market price = 7. 7%
Corporate Bond Quotes Cur Bonds Yld ATT 81/8 22 7. 7 Vol Close 52 1053/8 Net Chg + 1/4 Issued by AT&T 52 of these bonds traded that day 8. 125% coupon rate matures in 2022 Current yield = coupon/market price = 7. 7%
Corporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7. 7 52 1053/8 + 1/4 Issued by AT&T 52 of these bonds traded that day 8. 125% coupon rate matures in 2022 Current yield = coupon/market price = 7. 7% The closing price was 105 3/8% of par
Corporate Bond Quotes Cur Net Bonds Yld Vol Close Chg ATT 81/8 22 7. 7 52 1053/8 + 1/4 Issued by AT&T 52 of these bonds traded that day 8. 125% coupon rate matures in 2022 Current yield = coupon/market price = 7. 7% The closing price was 105 3/8% of par which was up 1/4 from the prior day
Corporate Bond Quotes • Notations – “cv” = convertible – “zr” = zero coupon – “dc” = deep discount (at time of issue) • Accrued interest must be added to price quoted
Treasury and Agency Bond Quotes • Notations – “n” = treasury note – “p” = treasury note on which nonresident aliens are exempt from withholding taxes on interest • Quotes resemble OTC securities with bid and ask prices
Treasury and Agency Bond Quotes GOVT. BONDS & NOTES Maturity Rate Mo/Yr Bid Asked 55/8 Dec 99 n 100: 08 100: 10 Chg. Ask Yld. …. 5. 04
Treasury and Agency Bond Quotes GOVT. BONDS & NOTES Maturity Rate Mo/Yr Bid Asked 55/8 Dec 99 n 100: 08 100: 10 Chg. Ask Yld. …. 5. 04 Prices are in 32 nds usually with a very small spread between bid and ask
Treasury and Agency Bond Quotes • U. S. Treasury Strips – “ci” is the coupon interest portion stripped from the note – “np” is the principal payment for the treasury note • Treasury Bills – Pure discount instrument - there is no coupon, they par at maturity – The bid-ask is not the price but the yield
Municipal Bond Quotes 200 INDIANA ST OFFICE BLDG COMMN MBIA 0. 000 07/01/05 5. 60 BEARSTER Quote from The Blue List of Current Municipal Offerings $200, 000 of Indiana State Office Building bonds Guaranteed by MBIA These are zero coupon bonds due July 1, 2005 The yield to maturity is given as 5. 6% To determine the price you compute the discount value The dealer offering the bonds is Bear Sterns, listed in the back of the publication with their phone number
Municipal Bond Quotes • Notations ETM = escrow till maturity M/S/F = mandatory sinking fund (C 97) = this bond became callable in 1997 When the market yield equals the coupon rate, the price is 100 and they are referred to as dollar bonds “+” in the left column indicates a new item “#” before yield to maturity or price indicates a change
The Internet Investments Online www. bonds-online. com www. prusec. com/daily. htm www. fitchinv. com www. moodys. com www. standardandpoors. com/ratings www. bradynet. com www. bondmarkets. com
End of Chapter 15 –Bond Fundamentals
Future topics Chapter 19 • The Analysis and Valuation of Bonds
- Slides: 48