Fixed-Income Securities and Derivatives Handbook, Second Edition

CHAPTER 1

The Bond Instrument

Bonds are the basic ingredient of the U.S. debt-capital market, which is the cornerstone of the U.S. economy. All evening television news programs include a slot during which the newscaster informs viewers where the main stock market indexes closed that day and where key foreign exchange rates ended up. Financial sections of most newspapers also indicate at what yield the Treasury long bond closed. This coverage reflects the fact that bond prices are affected directly by economic and political events, and yield levels on certain government bonds are fundamental economic indicators. The yield level on the U.S. Treasury long bond, for instance, mirrors the market’s view on U.S. interest rates, inflation, public-sector ...