Reading 49

Fixed Income · Fixed-Income Issuance and Trading

MODULE 49.1: FIXED-INCOME ISSUANCE AND TRADING

LOS 49.a

Describe fixed-income market segments and their issuer and investor participants.

Global bond markets are primarily segmented by type of issuer (sector), credit quality, and time to maturity. Other classifications include currency, the issuer's geography, and ESG (environmental, social, and governance) features.

Type of issuer. Major classes are governments (sovereign and non-sovereign), corporates, and special purpose entities issuing asset-backed securities (ABSs).
Credit quality. S&P and Moody's are the major credit rating agencies. Ratings of AAA to BBB− (S&P) / Aaa to Baa3 (Moody's) are investment-grade. Ratings of BB+ or lower (Ba1 or lower for Moody's) are high-yield (speculative or "junk") bonds.
Original maturities. Short-term (money market) securities have original maturities of less than 1 year; intermediate-term has 1–10 years; long-term is over 10 years.

中文翻譯

全球債券市場主要按以下三項分類：發行人類型（部門別）、信用品質、到期期限。其他分類還包括幣別、發行人地理區域，以及ESG（環境、社會、治理）特徵。

發行人類型：主要包括政府（主權與次主權）、企業、以及發行資產擔保證券（ABS）的特殊目的實體。
信用品質：S&P與Moody's為主要信評機構。AAA至BBB−（S&P）／Aaa至Baa3（Moody's）為投資等級；BB+及以下（Ba1及以下）稱為高收益債（投機級／垃圾債）。
原始到期期限：短期（貨幣市場）債券原始到期期限不到1年；中期為1至10年；長期超過10年。

Figure 49.1: Issuer Credit/Maturity Spectrum

Credit Quality	Short-Term (<1y)	Intermediate (1–10y)	Long-Term (>10y)
"Default Risk Free"	Treasury bills	Treasury notes	Treasury bonds
Investment Grade	Repo; Commercial paper; ABCP	Unsecured corporate bonds; ABS; MBS	Unsecured corporate bonds
High Yield	—	Leveraged loans; Secured corporate bonds	Secured corporate bonds

Note: ABCP = asset-backed commercial paper.

教授提醒

Repos are sale-and-repurchase agreements, covered in a later reading. For now, treat them as short-term secured borrowing arrangements used for short-term financing. Asset-backed commercial paper (ABCP) is a form of short-term asset-backed security.

Secured corporate bonds appear in the high-yield category because the table refers to new issues. Companies with less reliable operating cash flows must offer security (collateral) to attract investors. The high-yield sector also includes bonds of previously investment-grade issuers that have been downgraded due to deteriorating credit quality — these are known as fallen angels.

The choice of bond a corporate issuer makes is driven by its access to capital markets and the intended use of proceeds:

A well-established, investment-grade firm may issue commercial paper for short-term working capital, intermediate-term debt for medium-term investments and permanent working capital, and long-term debt for capital investment in fixed assets.
Short- and medium-term issues can be arranged through a syndicate of banks offering credit facilities, allowing on-demand issuance.
A riskier firm with less stable cash flows is likely to have limited access to secured short-term financing and leveraged loans.

中文翻譯

圖49.1 發行人信用／期限光譜：

無違約風險（政府）：短期 Treasury bills、中期 Treasury notes、長期 Treasury bonds。
投資等級：短期—Repo、商業本票（CP）、ABCP；中期—無擔保公司債、ABS、MBS；長期—無擔保公司債。
高收益等級：中期—槓桿貸款、有擔保公司債；長期—有擔保公司債。

教授提醒：Repo（附買回協議）為短期擔保借款，後續章節詳述；ABCP為短期資產擔保證券。

有擔保公司債列在高收益等級，是因為此處指的是新發行。營運現金流較不穩定的公司必須提供擔保品才能吸引投資者。高收益部門也包括因信用惡化而從投資等級被下調的墮落天使（fallen angels）。

企業選擇發行哪種債券，取決於資本市場接觸管道與資金用途：

體質良好的投資等級公司：以商業本票支應短期營運資金，中期債支應中期投資與長期性營運資金，長期債支應固定資產投資。
短／中期發行可透過銀行聯貸方式取得授信額度，視業務需求機動發行。
體質較差、現金流不穩定的公司，取得擔保短期融資與槓桿貸款的管道較受限。

Investor positioning within the credit/maturity spectrum depends on each investor's desired interest-rate and credit-risk exposure, and on the maturity of any obligations they need to meet from bond cash flows.

Figure 49.2: Investor Positioning in Credit/Maturity Spectrum

Investor Type	Typical Positioning
Pension funds & insurance companies	Long-term, investment-grade securities to match long-term liabilities (pensions, insurance claims). Often regulated against owning high-yield.
Corporations	Earn returns on excess liquidity via short-term commercial paper, repos, and ABCP.
Central banks	Use intermediate-term Treasury notes as a monetary policy tool to adjust commercial bank reserves.
Bond funds & ETFs	Position per stated mandate — usually intermediate-term investment-grade, excluding Treasuries.
Asset managers / Hedge funds	Higher-return, riskier high-yield intermediate securities.
Distressed debt funds	Lowest end of credit spectrum.
Financial intermediaries (banks)	Treasuries across the entire maturity spectrum to manage interest-rate and liquidity risks.

中文翻譯

投資人定位取決於個別機構的利率與信用風險偏好，以及其從債券現金流支應之負債的期限結構。

圖49.2 投資人定位：

退休基金、保險公司：長期、投資等級債券，以匹配支付退休金與保險理賠的長期負債。法規常禁止持有高收益債。
企業：多餘流動性投資於短期商業本票、Repo、ABCP。
中央銀行：使用中期Treasury notes作為貨幣政策工具，調節商業銀行準備金。
債券基金與ETF：依其投資聲明定位，通常為中期投資等級（不含Treasuries）。
資產管理人、避險基金：追求較高報酬，投資於風險較高的中期高收益債。
困境債務基金：處於信用光譜最低端。
金融中介（銀行）：跨整個期限光譜持有Treasuries，管理利率與流動性風險。

LOS 49.b

Describe types of fixed-income indexes.

Fixed-income indexes differ from equity indexes in three key ways:

Many more constituents. A corporate issuer typically has many bond issues outstanding but only a few share classes. Bond tracker funds therefore use sampling rather than buying every constituent, to keep transaction complexity reasonable.
Higher turnover. Bonds mature and are reissued frequently, causing more frequent removal/replacement of constituents than in equity indexes.
Sector weighting effects. Bonds are issued across many sectors. Governments are usually the largest issuers, so broad bond indexes carry large sovereign weights. Changes in debt-issuance trends (maturity, credit quality) affect index weights over time.

Indexes that contain a broad selection of bonds are called aggregate indexes (e.g., the Bloomberg Barclays Aggregate Index — bonds from all sectors across 28 currencies; excludes high-yield, unrated, and below minimum size).

Indexes can have a narrower focus on geography, credit quality, sector, or maturity. For example, the JP Morgan Emerging Markets Bond Index Plus contains USD-denominated emerging-market sovereign debt rated Baa1/BBB+ or below, with minimum size and maturity limits.

Indexes can also incorporate ESG factors. The Bloomberg Barclays MSCI Euro Corporate Sustainable SRI Index, for example, requires a minimum credit rating of Baa3/BBB− and a minimum ESG rating of BBB, and screens out sectors deemed incompatible with sustainable investing (e.g., alcohol, thermal coal generation).

An index used as a benchmark for a bond fund should match the fund's exposure in sector focus, credit quality, and maturity.

中文翻譯

債券指數與股票指數的三項主要差異：

成分券數量遠多。同一發行人可能有多檔在外流通債券，但通常只有少數幾種股份；因此債券追蹤型基金採用抽樣法，不全部購入指數成分券，以控制交易複雜度。
換手率較高。債券到期與再發行頻繁，成分券的剔除與替換頻率高於股票指數。
部門權重效果。債券發行橫跨多個部門，政府通常為最大發行人，因此廣義指數中主權債權重較高。發行趨勢的變動（期限、信用品質）會影響指數權重。

包含廣泛債券種類的稱為綜合指數（aggregate index），例如 Bloomberg Barclays Aggregate Index（涵蓋28種幣別、所有部門；排除高收益、未評等及未達最小規模者）。

也有按地理、信評、部門或期限聚焦的窄基指數（如 JP Morgan EMBI Plus）。

指數也可納入ESG因素，例如 Bloomberg Barclays MSCI Euro Corporate Sustainable SRI Index 要求最低信評 Baa3/BBB−、最低ESG評等BBB，並排除酒類、燃煤發電等部門。

作為債券基金基準的指數，須在部門焦點、信用品質、期限三方面與基金本身曝險相符。

LOS 49.c

Compare primary and secondary fixed-income markets to equity markets.

Primary markets: Sales of newly issued bonds, in which the issuer sells new securities to investors and receives new capital. Newly issued bonds may be sold via:

Public offering — registered with securities regulators for sale to the public.
Private placement — sold only to selected investors.

Both are usually carried out through financial intermediaries (investment banks). A debut issuer is one offering its first-ever bond — typically a growing, maturing firm replacing bank loans with bond proceeds.

Bonds may be sold through:

Underwritten offering. The issue price is guaranteed by the financial intermediaries conducting the sale.
Best-efforts offering. Price is not guaranteed; intermediaries charge a commission for placing bonds at the best price possible.

In a shelf registration, a bond issue is registered with regulators in its aggregate value via a master prospectus; bonds can then be issued over time as the issuer needs to raise funds.

Debut issues usually require weeks of underwriter "roadshows" to introduce investors to the issuer. For a frequent investment-grade issuer with a fully underwritten shelf registration, the time from agreement to allocation may be just hours, because investors already know the issuer and registrations are in place. Issuance takes much longer for a smaller high-yield issue with detailed covenants and collateral provisions on a best-efforts basis.

Some bonds — especially government bonds — are sold through a public auction, covered in the reading on Fixed-Income Markets for Government Issuers.

中文翻譯

初級市場：新債發行——發行人售出新證券、取得新資金。新債銷售方式：

公開發行：向證券主管機關登記後對公眾銷售。
私募：僅銷售予特定投資者。

兩者通常透過金融中介（投資銀行）執行。首次發行人（debut issuer）指首次發行債券者，通常為成長中的成熟企業以債券取代銀行貸款。

銷售方式：

承銷發行（underwritten）：發行價由承銷之金融中介保證。
盡力銷售（best-efforts）：價格不保證，中介收取佣金，盡力以最佳價格代售。

儲架登記（shelf registration）：以總額一次向主管機關登記並提交主公開說明書，之後可在需要資金時分次發行。

首次發行通常需要承銷團數週路演（roadshow）。對於已完成儲架登記、承銷的常態投資等級發行人，從議定到完成配售可能僅需數小時。較小型、需詳細契約條款與擔保條款、以盡力銷售方式的高收益小額發行，所需時間顯著較長。

政府債券常透過公開競標（auction）發行，將於政府發行人章節詳述。

Secondary markets: The trading of previously issued bonds among investors. Although some electronic platform and exchange-based trading exists, the majority of bond secondary trading remains in the dealer (over-the-counter, OTC) market.

Dealers post bid (purchase) and ask/offer (selling) prices for various bond issues. The difference between bid and ask is the dealer's spread. Spread varies with liquidity:

A fraction of a basis point for liquid, recently issued "on-the-run" developed-market sovereigns and high-credit-quality frequent corporate issuers.
10–20 bps or more for less liquid, smaller, or older "seasoned" corporate issues.

Distressed debt refers to bonds of issuers that are in, or expected to file for, bankruptcy. A distressed-debt investor may buy debt from institutions prohibited from holding low-rated securities, and seeks to profit from:

The issuer's fortunes reversing.
Higher-than-expected recovery rates in liquidation.
Value-enhancing restructuring.

For an otherwise infrequently traded issue, entering distress can temporarily increase trading activity.

中文翻譯

次級市場：已發行債券於投資人之間的交易。雖有部分電子平台與交易所交易，多數債券交易仍在店頭（OTC）造市商市場進行。

造市商報出買價（bid）與賣價（ask/offer），兩者之差為造市商價差（dealer's spread）。價差視流動性而異：

對流動性高、剛發行的"on-the-run"已開發國家主權債及高信用頻繁發行的公司債：價差不到一個基點。
對流動性較低、規模較小或"seasoned"（老券）公司債：價差可達10–20 bps或更高。

困境債務（distressed debt）：發行人已申請破產或預期將申請破產的債券。困境債投資人可能向法規禁止持有低信評證券的機構買入這類債券，並從以下方面獲利：

發行人經營狀況反轉好轉。
清算回收率優於預期。
價值提升的重整方案。

原本交易稀少的債券，進入困境狀態時可能暫時放大交易活動。

Module Quiz 49.1

1. Funds required by a corporation to finance investment in seasonal working capital are most likely raised through issuing:

A. secured bonds.
B. Treasury notes.
C. commercial paper.

C — Corporations are most likely to fund short-term seasonal working capital by issuing short-term commercial paper, since its maturity (under one year) matches the required investment period. Intermediate-term corporate bonds fund longer-term working capital and medium-term fixed investment. Treasury notes are issued by governments, not corporations. (LOS 49.a)

2. Compared to equity indexes, aggregate fixed-income indexes are most likely to have a lower:

A. turnover.
B. weight in the corporate sector.
C. number of constituents.

B — Aggregate fixed-income indexes include constituents from all sectors and are dominated by sovereigns, so they have lower corporate-sector weights than equity indexes (which include only corporate equity issuers). Bond indexes have higher turnover (frequent maturity / re-issue) and a higher number of constituents (one issuer typically has many bonds, but few share classes). (LOS 49.b)

3. In which type of primary market transaction does an investment bank sell bonds on a commission basis?

A. Single-price auction.
B. Best-efforts offering.
C. Underwritten offering.

B — In a best-efforts offering, the investment bank does not underwrite (purchase) the issue but sells the bonds on commission. Bonds sold by auction are offered directly to buyers by the issuer (typically a government). (LOS 49.c)

4. Secondary market bond transactions most likely take place:

A. in dealer markets.
B. in brokered markets.
C. on organized exchanges.

A — The secondary market for bonds is primarily a dealer (OTC) market, where dealers post bid and ask prices. (LOS 49.c)

5. Sovereign bonds are described as "on the run" when they:

A. are the most recent issue in a specific maturity.
B. have increased substantially in price since they were issued.
C. receive greater-than-expected demand from auction bidders.

A — Sovereign bonds are described as "on the run" when they represent the most recent issue in a specific maturity. (LOS 49.c)

Key Concepts — Reading 49

LOS 49.a

Global bond markets are classified by:

Type of issuer: sovereign, corporate, special purpose entities issuing ABSs.
Credit quality: investment grade (Baa3/BBB− and above) vs. non-investment grade (Ba1/BB+ and below).
Original maturity: short term/money market (≤ 1 year), intermediate term (1–10 years), long term (> 10 years).

A well-established investment-grade firm may issue commercial paper for short-term working capital, intermediate-term debt for medium-term investments and permanent working capital, and long-term debt for fixed-asset capital investment.

Investor positioning by credit/maturity:

Pension funds & insurers: long-term investment grade.
Corporations: short-term investment grade (excluding T-bills).
Central banks: intermediate-term Treasury notes (monetary policy tool).
Bond funds & ETFs: intermediate investment grade (excluding T-notes).
Asset managers seeking higher returns: high-yield intermediate, distressed debt.
Banks (financial intermediaries): Treasuries across the maturity spectrum.

LOS 49.b

Relative to equity indexes, fixed-income indexes have more constituents, higher turnover, and weights more affected by issuer sector and changes in borrowing trends. Aggregate indexes include all relevant bonds; narrower indexes focus on sector, credit quality, geography, or ESG criteria.

LOS 49.c

Primary market: bonds may be issued via public offering or private placement. Underwritten issues have a price guaranteed by intermediaries; best-efforts issues do not. Government debt is commonly issued via auction. Debut issues are more time-consuming and costly than repeat issues.

Secondary market: most bonds trade OTC in dealer markets; spreads are narrower for liquid issues, wider for less liquid ones. Distressed debt = bonds of issuers in, or expected to file for, bankruptcy.

中文翻譯 — 重點整理

【LOS 49.a】全球債券市場分類：①發行人類型（主權／企業／ABS發行體）；②信用品質（投資等級 Baa3/BBB−以上 vs 非投資等級 Ba1/BB+以下）；③原始期限（短期≤1年／中期1–10年／長期>10年）。

體質良好的投資等級公司：以商業本票支應短期營運資金，中期債支應中期投資，長期債支應固定資產。投資人定位：退休金／保險公司——長期投資等級；企業——短期投資等級（不含T-bills）；央行——中期Treasury notes（貨幣政策）；債券基金／ETF——中期投資等級（不含T-notes）；追求高報酬的資產管理人——中期高收益、困境債；銀行——跨期Treasuries。

【LOS 49.b】相對股票指數，債券指數成分券更多、換手率更高、權重受發行部門與借貸趨勢影響更大。綜合指數涵蓋全部相關債券；窄基指數聚焦特定部門、信用、地理或ESG。

【LOS 49.c】初級市場可採公開發行或私募；承銷發行價格由中介保證，盡力銷售則不保證；政府債常用公開競標；首次發行較耗時且成本較高。次級市場以OTC造市商市場為主；流動性高者價差小，反之較大。困境債務指已或預期申請破產發行人之債券。