putable bonds. The 20 gain (ignoring time value of money) is in lieu of the regular coupon. A less common feature is an embedded put option that allows investors to put the bond back to the issuer before its maturity date. Spatt offered the following opinion on the transparency of corporate bond markets: Frankly, I find it surprising that there has been so little attention to pre-trade transparency in the design of the.S. 6 References edit O'Sullivan, Arthur ; Sheffrin, Steven. Corporate bond market transparency edit Speaking in 2005, SEC Chief Economist Chester. Other bonds, known as convertible bonds, allow investors to convert the bond into equity.
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An anticipation of inflation, or higher inflation, may depress prices immediately. Strictly speaking, however, it only applies to those issued by corporations. For example, many pension funds and insurance companies are prohibited from holding more than a token amount of High Yield bonds (by internal rules or government regulation). "Broad Themes in Market Microstructure". A corporate bond is a bond issued by a corporation in order to raise financing for a variety of reasons such as to ongoing operations, M A, or to expand business. However, vast majority of trading volume happens over-the-counter. 1, the term is usually applied to longer-term debt instruments, with maturity of at least one year. Valuation edit High Grade corporate bonds usually trade on credit spread. Interest Rate Risk : The level of Yields generally in a bond market, as expressed by Government Bond Yields, may change and thus bring about changes in the market value of Fixed-Coupon bonds so that their Yield to Maturity adjusts to newly appropriate levels. Sometimes, the term is used to include all bonds except those issued by governments in their own currencies. Corporate bond holders are compensated for this risk by receiving a higher yield than government bonds. 2 Other avro phonetic software free download risks in corporate bonds edit Default Risk has been discussed above but there are also other risks for which corporate bondholders expect to be compensated by credit spread.