Series 7 definitions and key notes

trade at a discount to par, mature in less than a year, a direct obligation of US govt, are noncallable

issued in denominations of $100 to $5million, have original maturities of 4,13,and 26 weeks and are auctioned weekly.

are subject to change

Tbills are quoted on a yield basis and sold at a discount from par. They are zero coupon secuirities

pay interest every six months, sold at auction every 4 weeks

Issued in denominations of $100 to $5 million, T-notes are intermediate-term bonds maturing in 2 to 10 year. Tnotes mature at par, refunded

long term securities (10-30yrs) pays interest every six months

issued in denom of $100 to $5 million, mature in more than 10 years from date of issue

backed in full by the US Government, major banks and dealers peform actual separation and trading

not backed in full by US Govt, sold under names like

Treasury Inflation Protection Services, helps protect investors against purchasing power risk.

issued with fixed interest rate, principal amount is adjusted semi annually, exempt from state and local income taxes, subject to fed tax

TIPS

sometimes used to refer to entities that arent technically govt agen but have ties to govt. Fannie Mae is privately owned but govt sponsere

settle regular way (3 business days)

govt owned corp supports Depart of Housing and Urban development, only agency securities backed by the full faith and credit of fed govt

susceptible to reinvestment risk -interest rates fall, holders will refinance paying off mortgage early

best answer is typically a zero coupon bond

refers to mechanism of passing homebuyers interest and principal payments from mortgage holder to investors (FNMA GNMA and FHLMC)

$1,000 minimums, monthly interest & princpal , taxed at all levels, pass through certificates, significant reinvestment risk. backed in full

generally have higher yields than yields of treasury; FNMA is publicly traded corp

placed by primary dealers in US Govt securities, Bids are not always filled

placed by other market participants (smaller banks, broker dealers). Bids are always filled

most bonds pay every six months, 1st or 15th of the month

always assume the first of the month January1 and July 1

calculated to add to price that buyer pays and seller receives when bond trades between coupon dates

method is used on all corp and muni bonds

is used on all US govt bonds

term used to describe a situation in which a bond trades without accrued interest. Zero coupon as well as income bonds trade flat

no accured interest, seller will receive the entire six months interest from the issuer

not backed by US govt, corporate instruments, interest is taxable at all levels, backed by mortgage pools, yields more than US tsy

have reduced prepayment and extension risk, have lower yields than comparable TACs

protected against prepayment risk but not extension risk

savings bond, earn fixed rate for 30 years, can be purchased in denom of $25; interest is only taxable at federal level

one of the important risks associated with CMOs and must be disclosed to prospective investors.

None

tbills, repos, reverse repo, bankers acceptances, commercial paper, negotiable certificate of deposit, fed funds

dealer agrees to buy securities from an investor and sell them back later at a higher price

short term time draft with a specified payment date, essentially a postdated check or line of credit, payment date normally 1- 270 days

corps issue short term, rates are lower than bank loan rates, sold at a discount matures at par

commercial paper sold by issuers through dealers rather than directly to the public

rate the commercial money center banks charge each other for overnight loans of $1 milion or more.

interest rate that large U.S. money center commercial banks charge their most creditworthy corporate borrowers for unsecured loans.

rate the Federal Reserve charges for short term loans to member banks

is the interest rate banks charge broker dealers on money thy borrow to lend to margin account customers

prime rate, call loan rate, discount rate, and fed funds rate

US dollars deposited in banks outside the US. Deposits remain denominated in US dollars rather than local currency

any long-term debt instrument issued and sold outside the country of the currency in which it is denominated

name of instrument tells you how principal and interest is paid. Eurodollar bonds pay in US dollars, eurobonds pay in foreign currency.

must be issued outside USA, issued in bearer form, interest is paid in 1 year, holders not subject to withholding tax

developed as a means of transacting business and trading, lending and consolidating foreign currency deposits

trade reporting only, not execution. Doesn't accept quotations,

reduce interest rate risk, reduce reinvestment risk, maintain cash flow and increased liquidity