In: Categories » Legal and finance » Bonds and Leads » Bond Fundamentals ~ Mortgage bonds Collateralized mortgage obligations Asset backed securities
|
Mortgage bonds,collateralized mortgage obligations, asset-backed securities (e.g., CARs andcredit card receivables), and international bonds. Mortgage Bonds The issuer of a mortgage bond has granted to the bondholder afirst-mortgage lien on some piece of property or possibly all the firm'sproperty. Such a lien provides greater security to the bondholder and a lowerinterest rate for the issuing firm. Please note that mortgage bonds differ frommortgage-backed securities (see Section C los f) in two aspects:
Collateralized MortgageObligations (CMOs) The main innovation of the CMO instrument is the segmentation ofirregular mortgage cash flows to create securities that are high-quality,short-, medium- and long-term collateralized bonds. Specifically, CMO investorsown bonds that are collateralized by a pool of mortgages or by a portfolio ofmortgage-backed securities. The bonds are serviced with the cash flows fromthese mortgages, but rather than the straight pass-through arrangement, the CMOsubstitutes a sequential distribution process that creates a series of bondswith varying maturities to appeal to a wider range of investors. Asset-Backed Securities(ABSs) They involve securitizing debt.
Important characteristics ofthe corporate bond markets in Japan, Germany, the United Kingdom, and the U.S. In the US corporate bond market:
The corporate bond market in Japan is made up of two components: (1) pure corporation bonds, which arebonds issued by industrial firms or utilities and (2) bank bonds, which are bondsissued by banks to finance loans to corporations. They are regulated by theKisaikai, a council composed of 22 bond-related banks and seven majorsecurities companies. Samurai bonds are yen-denominated bonds sold bynon-Japanese issuers and mainly sold in Japan.Euroyen bonds are yen-denominated bonds sold in market outside Japan byinternational syndicates. In Germany nonbank corporate bonds are almost nonexistent. All deutschemarkbonds of foreign issuers can be considered Eurobonds. Corporate bonds in the UK are available in three forms: debentures, unsecured loans andconvertible bonds. They are issued through both public offerings and privateplacements. UK foreign bonds, referred to as bulldog bonds, aresterling-denominated bonds issued by non-English firms and sold in London.
|
legal disclaimer
1) Our website is not responsible for the information contained by this article as well for any and all copyright infringements by authors and writers. E-articles is a free information resource. If you suspect this article for any copyright infringements, please read the Terms of service and contact us to investigate the problem.
2) The E-articles directory team is not responsible for inaccuracies, falsehoods, or any other types of misinformation this tutorial may contain and will not be liable for any loss or damage suffered by a user through the user's reliance on the information gained here. Please read the Terms of service
Useful tools and features
related articles
Two other types of bonds might be of interest to online investors: zero-coupon bonds and Eurobonds. I describe these alternative bond types in the following sections. Zero-coupon bonds Zero-coupon bonds offer no interest payments but are put on the market at prices substantially below their face values. The return to the investor is the difference between the investor’s cost and the face value received at the end of the life of the bond. If you ...
2. Which are the Generic Features of Bonds
Bonds are simply defined as long-term promissory notes from an issuer. Issuers tend to be large organizations, like the federal government and its agencies, and state and local governments. Bonds are contracts that state the interest payment (coupon rate) to be paid to the investor, the par value (principal or face value of the bond), and when the par value will be repaid to the investor. Overall, bonds provide the investor with security and a fixed income under a legal contract. Bondholders want to...
3. The difference between a corporate bond and a medium term note
Medium-term notes are corporate debt obligations offered to investors continuallyover a period of time by an agent of the issuer. They are offered to the public under SEC Rule 415 (the self registration rule). This rule allows issuers to sell securities on a continuous basis so that issuers have the flexibility to issue securities in favorable market conditions. They are priced at a spread to the Treasury yield curve at the time of the offering and typically i...
4. The basic features of a bond (maturity coupon rate and par value)
A fixed income securityis a financial obligation of an entity (the issuer) who promises to pay aspecified sum of money at specified future date. The promises of the issuer andthe rights of the bondholders are set forth in the indenture. The par value (principal, face value, redemption value, or maturity value) is theamount that the issuer agrees to repay the bondholder by the maturity date. Bonds can have any par value, though a par value of $1,000 is the most common. The price of a ...
Treasury securities are issued by the US Department of Treasury, andare backed by the full faith and credit of the USgovernment. They are considered as having no credit risk. There are two types of T-securities: discount and coupon securities.Treasury coupon securities come in two forms: fixed rate and variable-ratesecurities. T-Bills are also called discount securities. They have the following features: Issued at a discount to parvalue. No coupon rate. ...
6. Difference between an intermarket and intramarket sector spread
The bond market in the US isclassified into sectors based on the type of issuer. US government sector. US government agency sector. Municipal sector. Corporate sector: the subsectors are industrial companies, utility companies, finance companies, and banks. Mortgage sector. Asset-backed securities sector: subsectors are credit card receivables, home equity loans, automobile loans, manufactured housing loans, and student loans. Foreign sector: subsectors ar...
7. Different types of international bonds (foreign bonds Eurobonds Global bonds Sovereigndebt)
A foreign bond (called Yankee bond in the US, Samurai bond in Japan, Bulldog bond in the UK) is a bondissued in a country's national bond market by an issuer not domiciled in thatcountry where those bonds are subsequently traded. Regulatory authorities in the country where the bond is issued impose rules governing the issuance of foreign bonds. Issuers of foreign bonds include national governments and their subdivisions, corporations, and supranationals (an entity that is forme...
8. Zero Coupon Bonds
Zero-coupon bonds (zeros) are bonds in which there is no stated coupon rate, and so there is no current interest paid on them. Zeros are also sold at a discount, which is usually quite substantial. Their return to the investor is measured by their yield to maturity. For example, you wish to purchase a zero with a face value of $10,000 and a maturity date of 2018. You buy it for $2000. Because it is a zero-coupon bond, you will receive no interest payments. How- ever, when the bond matures in 2018, you will receiv...










