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Debt Instruments
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Treasury Bills (T-Bills)
Short-term debt securities issued by the government to finance operations. Example: Used to manage short-term liquidity needs of the government.
Treasury Bonds (T-Bonds)
Long-term, fixed-interest government debt securities with a maturity of more than ten years. Example: Used to finance long-term government projects or manage deficits.
Treasury Notes (T-Notes)
Medium-term debt instruments issued by a government with fixed interest rates and maturities typically ranging from 2 to 10 years. Example: Used for various government fundings, such as infrastructure.
Corporate Bonds
Debt securities issued by corporations to raise capital, paid back with interest over time. Example: A company might issue bonds to finance a new plant or equipment.
Municipal Bonds
Bonds issued by states, municipalities or counties to finance public projects. Example: Used to build schools, highways, or sewage systems.
Savings Bonds
Non-marketable, interest-bearing U.S. government bonds designed to save money over the long term. Example: Series EE bonds used as a gift to encourage savings.
Certificate of Deposit (CD)
A savings certificate with a fixed interest rate and maturity date issued by a bank. Example: Individuals use CDs for low-risk, interest-earning savings.
Commercial Paper
An unsecured, short-term debt instrument issued by a corporation, typically for financing accounts receivable and inventories. Example: Companies might issue commercial paper to cover short-term liabilities.
Junk Bonds
High-risk, high-yield bonds issued by companies or governments with lower credit ratings. Example: Often used by companies looking to finance acquisitions or turnaround efforts.
Convertible Bonds
Corporate bonds that can be converted into a predetermined number of the company's shares. Example: A way for companies to raise capital with the potential for reduced interest cost if the bonds are converted.
Zero-Coupon Bonds
A bond issued at a discount and redeemed for full face value at maturity. Example: Investors might choose these to preserve capital for a future expense like a child's education.
Sovereign Bonds
Debt securities issued by a national government in a foreign currency. Example: A means for governments to borrow in currencies more stable than their own.
Agency Bonds
Securities issued by government-affiliated organizations to fund their operations. Example: Federal agencies like Freddie Mac issuing bonds to finance mortgages.
Asset-Backed Securities (ABS)
Bonds or notes backed by financial assets. Example: Mortgage-backed securities (MBS), which are secured by mortgages on real properties.
Collateralized Debt Obligations (CDOs)
Complex structured finance product backed by a pool of loans and other assets. Example: Bundled diverse debt such as mortgages, loans, and bonds to sell to investors.
Inflation-Linked Bonds
Government bonds where the principal and interest payments adjust according to inflation. Example: Treasury Inflation-Protected Securities (TIPS) in the U.S.
Build America Bonds
Taxable municipal bonds that feature tax credits and federal subsidies for the bond issuer. Example: Used to finance public infrastructure projects.
Eurobonds
International bonds that are denominated in a currency not native to the country where it is issued. Example: An American corporation might issue Eurobonds in Euros to raise capital in European markets.
Fixed-Rate Bonds
Bonds that pay the same interest rate for their entire term. Example: Used by investors who require predictable income and can be issued by governments or corporations.
Floating-Rate Bonds
Securities with variable interest rates that adjust periodically to reflect market conditions. Example: Attractive to investors when interest rates are expected to rise.
Income Bonds
Bonds that only pay interest if the issuing entity has sufficient earnings to cover the coupon payments. Example: Often issued by companies in reorganization or financial difficulty.
Perpetual Bonds
Bonds with no maturity date. Interest is paid indefinitely. Example: Used by the British government in the past, known as consols.
Revenue Bonds
Municipal bonds repaid from the revenue generated by the project financed by the bond issuance. Example: Tolls from a highway or fees from a hospital.
Subordinated Debentures
A type of debt instrument that is paid after all other corporate debts and loans are repaid, in case of liquidation. Example: Issued by companies for acquisitions or growth, usually with higher interest rates.
War Bonds
Debt securities issued by a government to finance military operations during times of war. Example: Issued by the U.S. government during World War II to support the war effort.
Bearer Bonds
Physical bond certificates that are owned by the holder or bearer, rather than registered to a specific owner. Example: Used in the past for anonymous transfer, but now largely obsolete due to security concerns.
Catastrophe Bonds (Cat Bonds)
High-yield debt instruments that are designed to raise money in case of a catastrophic event such as a natural disaster. Example: Used by insurance companies to transfer the risk to investors.
Green Bonds
Bonds issued to finance environmentally friendly projects. Example: Used by companies or governments to fund renewable energy projects or efficient building construction.
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