tailieunhanh - Lecture Principles of money, banking, and financial markets (12th edition): Chapter 8 - Ritter, Silber, Udell

Chapter 8 - Money and capital markets. In this chapter you will learn to visualize the structure of the government bond market; explain the interaction of Eurodollars, CDs, and Repurchase agreements and their connection to short-term government debt; understand the market structure of the corporate and municipal debt markets; describe the structure of equity markets and the fundamentals that help determine their price. | Chapter 8 Money and Capital Markets Copyright © 2009 Pearson Addison-Wesley. All rights reserved. Learning Objectives • Visualize the structure of the government bond market • Explain the interaction of Eurodollars, CDs, and Repurchase agreements and their connection to shortterm government debt • Understand the market structure of the corporate and municipal debt markets • Describe the structure of equity markets and they fundamentals that help determine their price Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-2 Introduction • Market for . government securities is the center of the money and capital markets • . Treasury has to sell many hundred billion dollars worth of securities each year to pay off maturing issues and finance current government operations • Provides reference point for money market (debt less than one year) and capital markets (long-term debt/equities) Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-3 1 The Government Bond Market • When . government runs a deficit, the Treasury Department borrows money by selling government bonds • Sell to anyone willing to lend money to . government • Treasury issues a wide variety of maturities and types of government securities Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-4 The Government Bond Market (Cont.) • . securities are basically two types – Marketable [50%]--bought/sold in financial markets – Nonmarketable [50%]--sell back to Treasury • Types of Securities and Investors – Treasury Bills (T-bills) • Short-term—maturity of 3, 6 months or 1 year • Zero-coupon—sold at discount below face value Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 8-5 The Government Bond Market (Cont.) • Types of Securities and Investors (Cont.) – Treasury Notes • Maturity between one and ten years • Coupon instruments—interest usually paid semiannually – Treasury Bonds • Maturity longer than 10 year, up a maximum of 30 year • .