Sovereign Participation in the International Bond Market: The Ghana Case
International Bond Market
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Transcript of International Bond Market
International Bond Market(A Study on Citi Bank)
International Finance
Vipin VettickalOlgay AdanaAydan Fatullayeva
Citi Bank at a Glance
Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
Consumer businesses Institutional businesses
Citi bank Business
Retail Banking Citi Branded Credit Cards Citi Retail Services Citi Commercial Bank Citi Mortgage
Consumer businesses
Securities & Banking Citi Markets Corporate & Investment Banking Citi Private Bank Citi Treasury & Trade solution Citi Securities and Fund services
Institutional Businesses
WHAT IS BOND MARKET ?
The bond market is a financial market where participants buy and sell debt securities , usually in the form of bonds. The bond market primarily includes:- I) Government-issued securities. II) Corporate debt securities.
International Bond Market
A bond issued in a country or currency other than that of the investor or broker. They include Eurobonds, which are issued in a foreign currency, foreign bonds, which are issued by a foreign government or corporation in the domestic market, and global bonds, which are issued in both domestic and international markets.
INTERNATIONAL BOND IS FURTHER CLASSIFIED IN THREE TYPES Domestic Bond Euro Bond Foreign Bond
MEANING OF 'INTERNATIONAL BOND'
It is a debt market
It is a fund raising market
Fixed income instrument
Issued in foreign currency
It channelizing savings
FEATURES OF INTERNATIONAL BOND
Step 1:-A borrower will contact an investment banker.
Step 2:- The lead manager will invite other banks.
Step 3:-The managing group and banks will serve as underwriters for the underwriter issues.
Step 4:-The various members of the underwriting syndicate receive a portion of the spread.
Step 5:-The lead manager receives the full spread.
THE COMMON PROCESS OF ISSUING BOND
Straight Fixed-Rate
Floating-Rate Note
Convertible Bond
Straight Fixed-rate with equity warrants
Zero coupon bond
Dual-Currency bond
INSTRUMENTS OF INTERNATIONAL BOND MARKET
Inflation Risk
Interest Rate Risk
Default Risk
Downgrade Risk
Liquidity Risk
Reinvestment Risk
Rip-off Risk
RISK OF INVESTING IN BOND
ADVANTAGES & DISADVANTAGES OF INTERNATIONAL BOND
Diversify your portfolio
International fund raising instrument
Fixed income market
Investment avenue(short term as well as long term)
Outperformed by Mutual Funds
Fees
Risk
Limited Selection
Treasury bonds Corporate bonds Municipal bonds Mortgage securities International and emerging-market bonds
Bonds in Citibank
U.S. Treasuries are considered among the safest investments because they are backed by the "full faith and credit" of the U.S. government. While the regular interest payments from Treasuries are considered quite secure, the value of these bonds can fall sharply when interest rates rise. The bonds also carry inflation risk. We could lose money in inflation-adjusted terms if, say, consumer-price increases outpace the interest rate on your bonds.
Comes in Three Versions : Treasury bills Treasury notes Treasury bonds
Treasury bonds
Treasury bills
which mature in 90 days to one year
Treasury notes which mature in two to ten years
Treasury bonds which have maturities of up to 30 years
Treasury bonds
Corporate securities can offer higher yields, but they are also among the riskiest bonds, because they are backed only by a company's promise to pay. Interest on corporate bonds is fully taxable.
Corporate bonds are generally categorized into two broad groups
1.Investment grade
2.High-yield
Corporate Bonds
Investment-grade bonds Investment-grade bonds have ratings of Baa and above from
Moody's Investors Service and BBB and above from Standard & Poor's.
High-yield bonds High-yield bonds are considered to have a greater risk of default
than their investment-grade counterparts. Indeed, they are often called "junk bonds."
Corporate Bonds
Municipal bonds, or "munis," generally have lower yields than other bonds. But they are still a popular investment, especially with high-income earners.
Munis pay interest that is potentially exempt from federal, state and local income taxes.
Munis are exempt from state taxes if you own securities issued from within your state of residence.
Local tax exemption applies if you hold securities issued from within your city of residence
That municipal-bond interest can be subject to the Alternative Minimum Tax
classified into two groups- General obligation Revenue bonds
Municipal Bonds
General obligation General obligation bonds are backed by the taxing authority of
the state or municipality
Revenue bonds Revenue bonds are issued by an agency, commission or authority
Municipal Bonds
Mortgage securities are backed by an underlying bundle of mortages
carry a number of risks homeowners generally refinance
when interest rates are low, investors will have to reinvest at those lower rates. This is known as prepayment risk
Investors also face other risks, notably the risk that some homeowners may default on their mortgage payments. This can translate into a loss of money for mortgage-bond holders.
Mortage Securities
International bonds, including emerging-market debt, are issued by non-U.S. governments and corporations
International bonds carry many of the same risks as U.S. bonds, including interest rate risk, inflation risk and default risk
Investors have to contend with another important risk: currency risk
International bonds can also be buffeted by political, economic and social turmoil in the issuing country
International and Emerging-market bonds
Thank you