Fixed Income Market

In: Business and Management

Submitted By trymouse
Words 278
Pages 2
1. PRIMARY MARKETS

The primary markets vary from one market to another.

The major difference

In Treasury debt markets dealers bid in auctions conducted by the Fed, to obtain the Treasury debt securities in the primary markets.

In all other debt markets, dealers underwrite by forming syndicates to eventually distribute the securities to investors.

dealers' several functions,

(a) assessing the demand for the debt issue
(b) pricing the issue
(c) hedging inventory positions
(d) distributing securities to Ultimate investors

2. Treasury markets

In Treasury markets primary markets are characterized by an important set of players known as primary dealers.

They are banks and securities brokerages that trade in U.S. Government securities with the Federal Reserve System.

They have a direct phone line with the Fed and participate in the open market operations.
Bank-related primary dealers must be in compliance with Tier I and Tier II capital standards under the Basel Capital Accord

Primary dealers are expected to participate meaningfully in both the Fed’s open market operations and Treasury auctions and to provide the Fed’s trading desk with market information

3. Corporate debt

Corporate bonds can be placed in public bond markets by registering with the SECURIEs and Exchange Commission (SEC). The underwriters typically use a“firm commitment ’’ contract to distribute the debt securities to various institutional buyers.

n some circumstances, the underwriters use “best efforts ’’ distribution. Corporate bonds can also be privately placed to a few institutional investors such as pension funds and insurance companies.

Or corporate bonds can be sold through Rule 144a to qualifi ed institutional buyers (QIBs), without registration and with signifi cant trading restrictions until they are subsequently…...

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