An Introduction to Bond Markets, Fourth Edition

1

The secondary market is the market in which bonds and loans are traded after they have been struck between borrower and lender. The bonds are traded between third parties who generally would not have been party to the initial primary market transaction. Liquidity refers to the ease with which bonds can be bought and sold by market participants.

2

For more detail on the assumptions behind the yield-to-maturity calculation and why it is not a true interest rate, see Chapter 6 in the author’s book The Bond and Money Markets (Butterworth-Heinemann, 2001).

3

Readers can observe the basic principles using RATE, a yield curve model that can be downloaded free from www.yieldcurve.com

4

Source: JPMorgan fixed income research, 9 November 2005.

5

A small number of CDs are non-negotiable.

6

With thanks to Del Boy during the time he was at Tradition for pointing this out after I’d just bought a sizeable chunk of Japanese bank CDs . . . circa 1994.

7

A banker’s acceptance created to finance such a transaction is known as a third-party acceptance.

8

This is the Securities Act of 1933. Registration is with the Securities and Exchange Commission.

9

Source: BIS.

10

We shall use the term ‘sell/buy-back’ throughout this book. A repo is still a repo whether it is cash-driven or stock-driven, and one person’s stock-driven trade may well be another’s cash-driven one.

11

That is, a money market instrument quoted on a yield instrument, similar to a bank deposit or a CD. The other class of money ...