B3: Bond markets - created from Mind Map

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Primary market

Gilts

Corporate bonds

Secondary market

Government sector

Corporate sector

Sterling loans to foreign borrowers

Eurobond market

- arranging & selling of original issues

- issued by DMO on behalf of the gov't

- issued weekly to meet long-term financing needs of Gov't and uses an auction process

- lagre investors put in bids & for quantity of stock they want

- successfully bidders pay price they bid

- individuals submit non-competitive bids for amounts up to £500k and, if successful, are allocated stock at average of accepted prices

- issued less frequently

- investment bank manages the issue

- syndicate of banks may be used to market the bond to potential investors if issue is a large one

- issue & prospective coupon are marketed to potential investors

- potential investors place indicative bids to buy stock at certain price

- final terms agreed & issued to prospective investors, who then have 24 hrs to make firm bids

- trading takes place.

-substantial trading activity in bonds in UK in 4 markets. 3 are sterling markets that collectively make up UK bond market

Bond trading

Bonds are traded based on changing views on a no. of factors affecting investors:

what income they need & when

credit ratings of the issuers

future interest rate trends

changes to expected inflation rates

conduct of Gov't finances

international tensions & social & political environment generally

relative attraction of other assets

Eurobonds

International bonds, denominated in a currency other than that of the country where it is issued, i.e. British company issuing bonds in US in yen. Would be known as a Euroyen bond.

Bond Indices

FTSE Actuarial Gilt Index for UK or Barclays Capital Aggregate Bond Index for global bonds

Bond markets

Annotations

NOTES