金融市场与金融机构Chapter5

Interest payments on municipal bonds are exempt from federal income taxes, a factor that has the same effect on the demand for municipal bonds as an increase in their expected return.

5.1.4.1 Liquidity and Liquidity Premium (流动性溢价)


Corporate bonds are not as liquid because fewer bonds for any one corporation are traded; thus it can be costly to sell these bonds in an emergency because it may be hard to find buyers quickly. The differences between interest rates on corporate bonds and Treasury bonds (that is, the risk premiums) reflect not only the corporate bond’s default risk but its liquidity too. This is why a risk premium is sometimes called a

Treasury Bond Market
4. 5.
6.

Outcome

5.1.3.4 Bond Ratings
Bonds with low risk of defaults are called investment grade and have a rating of Baa (Moody) or BBB (S&P) or above, bonds with rating below are called Junk bonds.
Figure 1 shows the features as following: Interest rates on different categories of bonds differ from one another in any given year; The spread (or difference) between the interest rates varies over time.
5.1.3 Factors Affecting Risk Structure of Interest Rates - Default Risk (违约)
Leabharlann Baidu

One attribute of a bond that influences its interest rate is its risk of default, which occurs when the issuer of the bond is unable or unwilling to make interest payments when promised. U.S. Treasury bonds have usually been considered to have no default risk because the federal government can always increase taxes to pay off its obligations. Bonds like these with no default risk are called default-free bonds.

Treasury Bond Market
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2.

Outcome

Risk premium, ic - iT, rises

Risk premium reflects not only corporate bonds' default risk but also lower liquidity
5.1.5 Factors Affecting Risk Structure of Interest Rates - Income Taxes Factor
5.1.3.1 Default Risk Factor and Risk Premium (风险溢价)


The spread between the interest rates on bonds with default risk and default-free bonds, called the risk premium, indicates how much additional interest people must earn in order to be willing to hold that risky bond. A bond with default risk will always have a positive risk premium, and an increase in its default risk will raise the risk premium.
liquidity premium.
5.1.4.2 Decrease in Liquidity of Corporate Bonds
Figure 5.3 Response to a Decrease in the Liquidity of Corporate Bonds
5.1.4.3 Analysis of Figure 5.3: CB Becomes Less Liquid


Risk Structure of Interest Rates
Term Structure of Interest Rates
5.1 Risk Structure of Interest Rates

To start this discussion, we first examine the yields for several categories of long-term bonds over the last 85 years. You should note several aspects regarding these rates, related to different bond categories and how this has changed through time.

Treasury Bond Market
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Outcome
im < iT
5.2 Term Structure (期限结构) of interest rates – Three Facts
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Interest rates for different maturities move together
U.S. Treasury bonds are the most liquid of all longterm bonds because they are so widely traded that they are the easiest to sell quickly and the cost of selling them is low.

Municipal Bond Market
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Tax exemption raises relative Re on municipal bonds, Dm , Dm shifts right Pm , im Relative Re on Treasury bonds , DT , DT shifts left PT , iT
Yield curves tend to have steep upward slope (陡峭向上倾斜) when short rates are low and downward slope （向下倾斜） when short rates are high Yield curve is typically upward sloping
Chapter 5
How Do Risk and Term Structure Affect Interest Rates?
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We examine how the individual risk of a bond affects its required rate. We also explore how the general level of interest rates varies with the maturity of the debt instruments. Topics include:
5.1.5.1 Tax Advantages of Municipal Bonds
Figure 5.4 Interest Rates on Municipal and Treasury Bonds
5.1.5.2 Analysis of Figure 5.4: Tax Advantages of Municipal Bonds
5.1.3.3 Analysis of Figure 5.2: Increase in Default on CBs

Corporate Bond Market
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2.
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Re on corporate bonds , Dc , Dc shifts left Risk of corporate bonds , Dc , Dc shifts left Pc , ic

5.1.1 Risk Structure of Long Bonds in the U.S.
Figure 5.1 Long Term Bond Yields, 1919–2004
5.1.2 Two important features of interest-rate behavior for bonds
Relative Re on Treasury bonds , DT , DT shifts right Relative risk of Treasury bonds , DT , DT shifts right PT , iT Risk premium, ic - iT, rises

Corporate Bond Market
1.
2.
Liquidity of corporate bonds , Dc , Dc shifts left Pc , ic Relatively more liquid Treasury bonds, DT , DT shifts right PT , iT
5.1.3.2 Increase in Default Risk on Corporate Bonds
Figure 5.2 Response to an Increase in Default Risk on Corporate Bonds (e.g. worse economic environment)
5.1.4 Factors Affecting Risk Structure of Interest Rates - Liquidity

Another attribute of a bond that influences its interest rate is its liquidity; a liquid asset is one that can be quickly and cheaply converted into cash if the need arises. The more liquid an asset is, the more desirable it is (holding everything else constant).