Investment Theory COMM 371 Lecture IIIBond Prices, and Fixed Income SecuritiesDr. Farid Novin
Investment Theory, COMM 371, Dr. Farid Novin Lecture IIIOutline•What are fixed-income securities?•Why corporations and governments issue bonds outside of Canada?•What is a bond?
Investment Theory, COMM 371, Dr. Farid Novin Lecture IIIOutline•Bond Prices and Yields•Treasury issues•Canadian Treasury Bills•US Treasury Securities•Treasury strips.•The Yield Curve: the Term Structure of Interest Rates•Yield Curve and Bond Pricing•Valuing Coupon Bonds•Calculating the yield to maturity on the bond
Investment Theory, COMM 371, Dr. Farid Novin What are fixed-income securities?
Simplified Risk and Return Profile by Asset ClassFor illustration only. Diagram is not to scale or intended to be comprehensive. Debt securities are bolded in blue.Source: OSC
The Canadian Fixed Income Market-2014$322$1,556$468$61$2,407$0$500$1,000$1,500$2,000$2,500$3,000MoneyMarketGovt. BondsCorp. BondsForeign/Other BondsTotalDEBT ISSUED IN CANADA $BILLION$3.80$151$493$647.80$0.00$100.00$200.00$300.00$400.00$500.00$600.00$700.00Money MarketGovt BondsCorp. BondsTotalDEBT ISSUED OUTSIDE CANADA $BILLION
The Canadian Fixed Income MarketDomestic Long-Term Debt by Issuer ($2T total)Provlncial 25%Govt. of Canada23%Term Securitizations 23%Domestic Corp. 23%Foreign Corop/Other3%Municipal3%