International Bond Market


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International Bond Market (A study on Citi Bank)

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International Bond Market

  1. 1. International Bond Market (A Study on Citi Bank) Vipin Vettickal Olgay Adana Aydan Fatullayeva
  2. 2. Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.
  3. 3.   Consumer businesses Institutional businesses
  4. 4.      Retail Banking Citi Branded Credit Cards Citi Retail Services Citi Commercial Bank Citi Mortgage
  5. 5.       Securities & Banking Citi Markets Corporate & Investment Banking Citi Private Bank Citi Treasury & Trade solution Citi Securities and Fund services
  6. 6. WHAT IS BOND MARKET ? The bond market is a financial market where participants buy and sell debt securities , usually in the form of bonds. The bond market primarily includes:I) Government-issued securities. II) Corporate debt securities.
  7. 7. A bond issued in a country or currency other than that of the investor or broker. They include Eurobonds, which are issued in a foreign currency, foreign bonds, which are issued by a foreign government or corporation in the domestic market, and global bonds, which are issued in both domestic and international markets. INTERNATIONAL BOND IS FURTHER CLASSIFIED IN THREE TYPES  Domestic Bond  Euro Bond  Foreign Bond
  8. 8.  It is a debt market  It is a fund raising market  Fixed income instrument  Issued in foreign currency  It channelizing savings
  9. 9.  Step 1:-A borrower will contact an investment banker.  Step 2:- The lead manager will invite other banks.  Step 3:-The managing group and banks will serve as underwriters for the underwriter issues.  Step 4:-The various members of the underwriting syndicate receive a portion of the spread.  Step 5:-The lead manager receives the full spread.
  10. 10.  Straight Fixed-Rate  Floating-Rate Note  Convertible Bond  Straight Fixed-rate with equity warrants  Zero coupon bond  Dual-Currency bond
  11. 11.  Inflation Risk  Interest Rate Risk  Default Risk  Downgrade Risk  Liquidity Risk  Reinvestment Risk  Rip-off Risk
  12. 12. Diversify your portfolio International fund raising instrument Outperformed by Mutual Funds Fees Fixed income market Risk Investment avenue(short term as well as long term) Limited Selection
  13. 13.      Treasury bonds Corporate bonds Municipal bonds Mortgage securities International and emerging-market bonds
  14. 14.  U.S. Treasuries are considered among the safest investments because they are backed by the "full faith and credit" of the U.S. government. While the regular interest payments from Treasuries are considered quite secure, the value of these bonds can fall sharply when interest rates rise. The bonds also carry inflation risk. We could lose money in inflation-adjusted terms if, say, consumer-price increases outpace the interest rate on your bonds. Comes in Three Versions :    Treasury bills Treasury notes Treasury bonds
  15. 15.  Treasury bills which mature in 90 days to one year   Treasury notes which mature in two to ten years Treasury bonds which have maturities of up to 30 years
  16. 16.   Corporate securities can offer higher yields, but they are also among the riskiest bonds, because they are backed only by a company's promise to pay. Interest on corporate bonds is fully taxable. Corporate bonds are generally categorized into two broad groups 1.Investment grade 2.High-yield
  17. 17. Investment-grade bonds  Investment-grade bonds have ratings of Baa and above from Moody's Investors Service and BBB and above from Standard & Poor's. High-yield bonds  High-yield bonds are considered to have a greater risk of default than their investment-grade counterparts. Indeed, they are often called "junk bonds."
  18. 18. Municipal bonds, or "munis," generally have lower yields than other bonds. But they are still a popular investment, especially with high-income earners.     Munis pay interest that is potentially exempt from federal, state and local income taxes. Munis are exempt from state taxes if you own securities issued from within your state of residence. Local tax exemption applies if you hold securities issued from within your city of residence That municipal-bond interest can be subject to the Alternative Minimum Tax classified into two groups General obligation  Revenue bonds
  19. 19. General obligation  General obligation bonds are backed by the taxing authority of the state or municipality Revenue bonds  Revenue bonds are issued by an agency, commission or authority
  20. 20.     Mortgage securities are backed by an underlying bundle of mortages carry a number of risks homeowners generally refinance when interest rates are low, investors will have to reinvest at those lower rates. This is known as prepayment risk Investors also face other risks, notably the risk that some homeowners may default on their mortgage payments. This can translate into a loss of money for mortgage-bond holders.
  21. 21.     International bonds, including emergingmarket debt, are issued by non-U.S. governments and corporations International bonds carry many of the same risks as U.S. bonds, including interest rate risk, inflation risk and default risk Investors have to contend with another important risk: currency risk International bonds can also be buffeted by political, economic and social turmoil in the issuing country
  22. 22. Thank you