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1. 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: ...

2. 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...

3. 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...

4. Municipal Bonds
Municipal bonds, or “munis,” carry an important tax feature: the interest paid on these bonds are exempt from federal income tax, as well as state and local income tax in the state in which they are issued. This could mean significant savings in taxes that could otherwise be flowing to the government. Munis are especially attractive to investors whose tax brackets are quite high, therefore garnering them a greater after-tax return from tax-free interest than they would realize from taxable interest....

5. U.S. Savings Bonds
There are two types of savings bonds that are currently being issued: the Series EE and Series HH. U.S. savings bonds are registered, nontransferable, and noncallable securities. Because they are nontransferable, they aren’t marketable—you can’t sell them to another party, you can only redeem them. They are also unable to be accepted as collateral for a loan because of this provision. Series EE bonds are sold in par value amounts of $50 to $10,000, but the purchase price is 50 percent of th...

6. U.S. Government Agency Securities
While these types of securities are not issued directly from the U.S. government, they do carry some federal guarantees. Some of the agencies that issue these securities are the Federal National Mortgage Association (commonly referred to as Fannie Mae), the Government National Mortgage Association (Ginnie Mae), Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation (Freddie Mac), and the International Bank for Reconstruction and Development (World Bank). Typically, the yields on these securities are ...

7. U.S. Government Obligations
There are a number of different kinds of marketable U.S. government securities, including Treasury bills, notes, and bonds. TREASURY BILLS. Treasury bills are sold at a discount (less than the face value) and mature at face value. They mature at different periods, usually 13, 26, and 52 weeks. Bills are considered highly liquid, secure, short-term investments. TREASURY NOTES. Treasury notes have maturities ranging from 1 year to 10...