RSM430H1 Lecture Notes - Lecture 1: Freddie Mac, Bond Valuation, Unsecured Debt
Document Summary
Lecture 1: overview of fixed income markets and. Other asset classes (real estate, private equity, hedge funds, commodities) Low interest rates has decreased demand for fixed income securities. Financial and contractual obligation of entity that entitles holder to receive a pre- determined stream of future cash flows. Failure to pay may result in default and lead to bankruptcy. Missing a coupon payment on a bond has consequences. Bonds are at the top of capital structure. Equity has residual claim on assets in event of bankruptcy. Agency securities issued by fannie mae, freddie mac, sallie mae, cmhc. Debt of most agencies not guaranteed by government. Exempt from federal income and state local tax in us. Target investor is retail investor (particularly high net worth individuals) because of preferential tax treatment) Market virtually non-existent in canada because no preferential tax treatment. Backed by full faith and credit of issuer. Secured by assets of company: senior unsecured debt, subordinated debt.
