Clearing, Settlement and Custody

Chapter 3

Bond settlement

Introduction

A debt instrument represents a loan from the investor to the issuer

and must in most cases be paid back to the investor. The debt

instrument will either pay the investor interest at a fixed (hence the

term fixed income) or floating rate. In some cases the instrument will

instead of paying interest be issued at a discounted price, for example

a zero-coupon bond.

There is a wide variety of debt types (i.e. bond, loan stock) each with

its own unique features and settlement conventions. However, the

bond markets can be divided into two distinct groups, namely

international bonds and domestic bonds. The operations team ...