TREASURY - ENUMERATION

CAPITAL MARKETS

• money markets,

• bond markets,

• mortgage markets,

• stock markets,

• spot or cash markets,

• derivatives markets,

• foreign exchange markets, and

• interbank markets.

money market instruments

• Treasury bills,

• federal agency notes,

• certificates of deposit (CDs),

• commercial papers,

• bankers’ acceptances, and

• repurchase agreements (repos).

The major participants in the money market

• governments,

• commercial banks,

• corporations,

• government-sponsored enterprises,

• money-market mutual funds,

• brokers,

• dealers, and

• the Federal Reserve.

capital market instruments

• Treasury notes,

• Treasury bonds,

• municipal bonds, and

• corporate bonds.

corporate bonds

• zero coupon bonds,

• floating rate bonds, and

• convertible bonds.

the general market trends.

Bull markets and bear markets

Latin terminologies used in predicting the returns of a security.

Ex-ante and Ex-post

Based on the type of issuer, four major bond market sectors

• household,

• non-financial corporate,

• government, and

• financial institution sectors.

There are two mechanisms for issuing a bond in primary markets:

public offering and private offering

The underwriting process typically includes six phases:

1. the determination of the funding needs,

2. the selection of the underwriter,

3. the structuring and announcement of the bond offering,

4. pricing

5. issuance, and

6. closing.

Types of debt instruments

• money market instruments,

• corporate bonds,

• US Treasury securities,

• Agency securities, and

• sovereign debt.

largest investors in bonds

1. central banks

2. institutional investors, (such as pension funds, hedge funds, charitable foundations and endowments, insurance companies, mutual funds and ETFs, and banks)

3. retail investors, typically by means of indirect investments.

Public bond issuing mechanism

• underwritten offerings,

• best- efforts offerings,

• shelf registrations, and

• auctions.

companies raise debt

• bilateral loans

• syndicated loans

• commercial paper

• notes

• bonds

financial institution - additional sources of funds

• retails deposits

• central bank funds

• interbank funds

• large denomination negotiable certificates of deposit

• repurchase agreements

tradable securities that are backed by pools of underlying financial assets

• mortgages

• loans

• credit card debt

three main types of foreign exchange markets:

• spot forex market

• forward forex market

• futures forex market

advantages of foreign exchange markets

• liquidity

• accessibility

• diverse trading options

• low transaction costs

• leverage

• global market

• transparency

disadvantages of foreign exchange markets

• volatility

• risk of leverage

• high competition

• limited regulation

• complex market

• economic and political events

• high barriers to entry

participants in the foreign exchange market,

• commercial banks 

• central banks

• hedge funds and investment firms

• corporations

• retail traders

• governments

Several factors influence the foreign exchange market,

• Economic indicators

• Central bank policies:

• Geopolitical events:

• Market sentiment:

• Natural disasters:

• Speculation:

foreign exchange market plays a crucial role in the global economy, affecting countries in several ways:

• International trade:

• Capital flows:

• Monetary policy:

• Economic growth:

Several factors that can cause exchange rates to fall:

• decreased demand

• economic factors

• political instability

• central bank policies

• trade imbalances

In terms of exchange rate regimes, there are several basic types:

• free float,

• fixed,

• pegged and

• managed float, also called adjustable peg.

four broad reasons to use swaps:

(1) to exploit differences in credit rating and differential access to markets, thereby obtaining low-cost financing or high-yield assets;

(2) to hedge interest rate or currency exposure;

(3) to manage short-term assets and liabilities; and

(4) to speculate.

The most widely used ways of classifying fixed-income markets include the type of issuer;

• the bonds’ credit quality,

• maturity,

• currency denomination,

• and type of coupon;

• and where the bonds are issued and traded.