- prepayment risk and extension risk - the former if interest rates fall, the latter if interest rates rise. also, $1K is minimum denomination
- the interest rate the Fed charges banks to borrow money
- The yield on all maturities are essentially the same.
- sign of coming recession cause investors worried about corporate profits flee corp bonds in favor of safer govt bonds
- illiquid. transact generally only among state residents. Trade in OTC market.
- a tax on the production or sale of a specific good or service
- long term zeros, phantom interest. not suitable for income
- upward-sloping; long-term yields are higher than short-term yields
- A downward-sloping yield curve indicates that short-term interest rates are generally higher than long-term interest rates A sign that recession may be coming, so investors are buying long term bonds because the fed will be trying to bring down interest rates, so investors want to lock in LT bonds, in part cause bond prices go up when interest rates go down, so can get cap gain too.
- Only buys conventional mortgages. so riskier than Ginnie Mae
- It means it is trading with a 7% coupon but sold at a 5% YTM, which means it is trading at a premium, which brings down the yield.
- (Student Loan Marketing Association) provides federal guarantees for student loans and manages $180 billion of loans for 10 million borrowers. no government backing, now a private enterprise trading as SLM.
- Monthly auction (like all govt stuff, except t bills). also pay interest 2x/year as do treasury bonds. duration 2-10 years
- the interest rate at which banks make overnight loans to one another. overnight
- Government-sponsored enterprise; one of the largest .purchasers of residential mortgages in the secondary market. buys FHA, VA, and conventional mortgages. Riskier than Ginnie Mae
- The interest rate on the loans that the Fed makes to banks. slightly higher than the fed funds rate, so banks don't want this unless needed.
- semi annual interest paid, adjust for inflation. Par value goes up by inflation adjust and then coupon is paid on the higher par value.
- zero-coupon bonds that are structured by broker-dealers but backed by cash flows from Treasury securities. some risk as broker-dealer could go bankrupt
- key economic variables that economists use to predict a new phase of a business cycle. S&P 500, unemployment, new building permits, etc.
- A government agency that plays an important role in the secondary mortgage market it guarantees mortgage backed securities using FHA insured and VA guaranteed loans as collateral.