Bond Market: An Introduction

Bond Market: An Introduction

Prof. Dr AP Faure Rhodes University

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Description

The debt market is usually categorised into the short-term debt market (STDM) and long-term debt market (LTDM), and includes marketable and non-marketable debt. The money market is comprised of the STDM and the deposit market (which is overwhelmingly of short duration). The bond market is the marketable arm of the LTDM. Bonds are issued by governments (all levels), companies and special purpose vehicles, and there are many types and many risks to holding them. The bond market is an important asset class, yielding returns second to equities. The bottom end of the bond yield curve reflects money market rates (which reflect monetary policy) and its longer end reflects the shorter end, expectations in respect of the shorter end (which includes future inflation), as well as confidence.
Content

    Context & Essence
        Learning outcomes
        Introduction
        The financial system in brief
        The money market in a nutshell
        Essence of the bond market
        Essence of the plain vanilla bond
        Bond derivatives
        Summary
        Bibliography
    Issuers & Investors
        Learning outcomes
        Introduction
        The economics of long-term finance
        Issuers of bonds
        Government debt and fiscal policy
        Investors in bonds
        Summary
        Bibliography
    Instruments
        Learning outcomes
        Introduction
        Bond instruments
        Summary
        Bibliography
    Organisational structure
        Learning outcomes
        Introduction
        Risks in, and shortcomings of, OTC markets
        Advantages of exchange-driven markets
        Primary market
        Secondary market
        Summary
        Bibliography
    Mathematics
        Learning outcomes
        Introduction
        Present value / future value
        Annuities
        Plain vanilla bond
        Perpetual bonds
        Bonds with a variable rate
        CPI bonds
        Zero coupon bonds
        Strips
        Summary
        Bibliography
    Tools
        Learning outcomes
        Introduction
        Other yield measures
        Duration
        LCC per basis point
        The yield curve (term structure of interest rates)
        Summary
        Bibliography
    Endnotes

About the Author

Alexander Pierre Faure graduated from Elsenburg Agricultural College after school and went on to Stellenbosch University where he graduated with BA (Commerce), Hons BA (Economics), MA (Economics), and PhD (Economics).

He also successfully completed the Stockbroker Examination Requirements at Witwatersrand University (and is a registered Stockbroker - presently non-broking status).

He first worked for the central bank, where he was involved in compiling the monetary statistics (money stock and sources of change, and money market liquidity analysis) and later in the execution of monetary policy.

His career after central banking included private sector banking (the recipient of monetary policy), stockbroking (influenced by monetary policy) and interest rate analysis (reading monetary policy).

After his private sector experience, he became an academic and held the positions Investec Chair in Money and Banking (at Rhodes University and the University of Fort Hare) and Foord Chair in Investments (at Rhodes University).

He is currently at Rhodes University where he teaches financial markets and monetary economics.

He has published widely, including books and papers (his recent papers can be found at: http://ssrn.com/author=1786379).

He also served on a number of boards of directors, holding the positions of Non-executive Director and Managing Director.