BASIC FINANCIAL INSTRUMENTS

delivered by Wojciech Łyjak FCCA, CFA www.A4Training.com Treasury Bills: Primary Market Auction Results

2 Treasury Bills: Primary Market Auction Results

3 Primary Market Dealers ()

2020: 1. w Warszawie SA 2. SA 3. SA 4. Barclays Bank Plc 5. BNP Paribas SA 6. Goldman Sachs International 7. HSBC Bank plc 8. ING Bank Śląski SA 9. J.P. Morgan Securities plc 10. mBank SA 11. PKO BP SA 12. SA 13. Societe Generale SA oddział w Polsce

4 Treasury Auction Results United States

5 Treasury Auction Results United States

6 Treasury Auction Results Germany

7 Treasury Auction Results Germany

8 Treasury Bonds: Primary Market Auction Results

9 Treasury Bonds: Primary Market Auction Results

10 Bond prices, coupon rates and yields Bond price sensitivity The relationship between bond prices and yields is negative, i.e. if bond prices go up, yields decrease and vice versa.

The following relationships exist between bond yields and coupon rates:

• If bond price < par value, then yield > coupon rate

• If bond price > par value, then yield < coupon rate

• If bond price = par value, then yield = coupon rate

Bond prices are sensitive to changes in interest rates: • Maturity effect: bonds with longer maturities exhibit more sensitivity to interest rate changes than those with shorter maturities. • Coupon effect: bonds with lower coupon rates exhibit more sensitivity to interest rate changes than those with higher coupons.

11 Bond prices and yields Peugeot 6.5% 18Jan2019

12 Credit risk Ratings

13 Credit risk Ratings

14 Callable, putable and convertible bonds

• A call option gives the issuer the right to redeem the bond prior to the maturity date (callable bond) Redemption is usually at a premium to face value. The premium falls as the bond approaches maturity.

• A put option gives the holder the right to request early redemption (putable bond). Redemption will usually be at a discounted price.

• Convertible bonds give their holders the right to exchange the bonds for a specified number of shares in the issuing company (instead of redeeming the bonds at their par value) at a stated conversion price.

15 Callable, putable and convertible bonds Carnival Cruises convertible notes

16 Preferred Shares CITI extract

17 Ordinary shares Super-voting rights

18 Major Equity Markets

19 Initial Public Offering (IPO) Pandora

20 Initial Public Offering (IPO) Pandora

21 Initial Public Offering (IPO) - underwriting Pandora

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