Financial Markets : Securities, Lecture notes of Financial Market

Download Financial Markets : Securities and more Lecture notes Financial Market in PDF only on Docsity! Bond Markets: Bond ratings Bonds with longer maturities and low coupon rates experience larger price changes for a given change in interest rates than bonds with short maturities and high coupon rates. Bonds with longer maturities and lower coupon rates are subject to greater interest rate risk. Bond investors also need to measure the degree of default risk on bond. Large bond investors, traders and managers often evaluate default risk by conducting their own analysis of the issuer, including an assessment of bond issuer’s financial ratios and security prices. Small investors are not generally capable of generating the same extensive information and thus frequently rely on bond ratings provided by the bond rating agencies. Securities Markets Junk bond Also called high- yield bond. Bond rated as speculative or less than investment grade by bond- rating agencies. A bond downgraded from investment-grade status to junk bond status is called a “fallen angel.” Bond Market Indexes The indexes are those managed by investment banks and reflect both monthly capital gain and loss on bonds in the index plus any interest income earned. BOND MARKET PARTICIPANTS Bond markets bring together suppliers and demanders of long-term fund. The major purchasers of capital market securities are households, businesses, government units and foreign investors.