fixed coupons and fixed redemption dates. Either short/medium/long.
Medium 5 - 15 years.
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Undated/irredeemable gilts
No redemption date. Few carry 'Aft' which implies the gov has the right to redeem the gilt in 1966 or any time after.
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Index linked gilts
Have coupons and redemption values which are linked to the UK Retail Price Index (RPI). 3 month RPI lag. Issued before Sep 2005, the lag is 8 months.
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Double/dual-dated gilts
Two dates, Gov has option of redeeming after the first date but no later than the last.
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Convertible gilts
Grant the owner the right to convert the gilt into predefined amounts of a different gilt in the future. Usually short-medium bonds.
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STRIPS
Strips of constituent cash flows (the coupons and the redemption amount), and traded separately. The individual strips are registered securities. Can only be stripped by GEMMS, treasury and BoE. Anyone permitted to trade.
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Gilt repo
Transaction where one party sells gilts to another, agreeing a time to repurchase at an agreed price and date in the future. The sale and repurchase of gilts. Acquiring cash to increase liquidity
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Reverse repo
Reverse repo is the purchase and subsequent resale. Acquiring gilts to cover a short position.
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Bilateral repo and triparty repo
Bi: collateral and cash exchanged directly at the onset between two counter parties.
Tri: Use a third party bank which acts as custodian and clearing agent.
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repo rate
the difference between the sale price and the repurchase price
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call provision
entitles the issuer to repay the bond early
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put provision
entitles the holder to demand early repayment
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Sinking fund
Enables the issuer to repay a part of the nominal value each year prior to redemption.
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Protective covenants
Designed to protect the income streams on the issued bonds from undue risk.
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Convertibility
Where the bond can be converted into a certain number of equities, often seen as a low risk way of gaining exposure to an equity price increase.
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Fixed charge over assets
Mortgage bonds. Secured against a specific company asset.
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Floating charge over assets
Secured against a class of assets
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Collateralised Debt Obligations CDO
A security secured by the cash flows from a pool of bonds/loans/other assets. form of ABS.
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Synthetic CDOS.
No physical transfer of bonds or loans takes place CDO gains exposure to credit risk by selling a credit default swap to the credit institution that holds the bonds or loans.
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Floating Rate Notes
Coupon is not fixed it floats in rate with market rates.
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Eurobonds
Bearer bonds (anon and freely transferable). Many are kept in Euroclear and Clearstream (immobilisation). Can be denominated in any currency. Interest paid once per year. ICMA
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Conversion price
Nominal value of convertible / conversion ratio
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Contingent Convertible Bonds (CoCos)
Converted into shares when trigger is met. Mechanical trigger : banks capital ratio. Discretionary trigger: Regulators opinion on solvency.
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