Fixed Income Products, Field to Field

Short-term sovereign debt sold at a discount to face value, with no periodic coupon — the return is simply the gap between the discounted purchase price and par received at maturity.

Real-world exampleThe 4-week and 13-week T-Bill auctions are closely watched short-end rate benchmarks, since their yields reflect near-term Fed policy expectations directly.

Longer-dated sovereign debt paying a fixed coupon semi-annually until maturity, when full face value is repaid. "Notes" generally means 2–10 year maturities and "Bonds" 20–30 years — largely a naming convention.

Real-world exampleThe 10-year Treasury yield is the single most-watched benchmark rate in global fixed income, the reference point for pricing virtually every other USD bond's credit spread.

A Treasury security whose principal adjusts daily with CPI-U, protecting the holder's real return; the fixed coupon applies to the inflation-adjusted principal, so the actual cash coupon paid rises and falls with inflation.

Real-world exampleTIPS became a widely-discussed portfolio hedge during the high-inflation period of 2021–2023, as investors sought protection against eroding real returns on plain nominal Treasuries.

Sovereign debt issued outside the US — UK Gilts, German Bunds, Japanese Government Bonds, and emerging-market sovereigns (often issued in USD/EUR to attract international investors) — each with its own auction process, settlement infrastructure, and conventions.

Real-world exampleThe UK and EU are scheduled to adopt T+1 settlement in October 2027 — years behind the US's May 2024 move, illustrating how settlement infrastructure changes on very different timelines across markets.

Debt issued by government-sponsored enterprises — chartered by Congress but not technically part of government — carrying implied (not explicit, outside conservatorship) government backing that lets them borrow close to, but slightly above, Treasury rates.

Real-world exampleAgency debt and Agency MBS together form one of the largest segments of the US fixed income market, central to overall mortgage-market liquidity.

Debt issued by US state and local governments or agencies to fund public projects — General Obligation (GO) bonds backed by the issuer's taxing power, and Revenue bonds backed by a specific project's cash flows (a toll road, a utility, a hospital).

Real-world exampleMunicipal bonds moved from T+2 to T+1 settlement alongside corporate bonds and equities in the industry-wide May 2024 change.

Debt issued by corporations rated BBB−/Baa3 or higher — the threshold that determines eligibility for many institutional mandates (pension funds, insurers) restricted to investment-grade holdings only.

Real-world exampleA downgrade from BBB− to BB+ creates a "fallen angel," often forcing IG-only holders to sell regardless of their own credit view — a technical, not fundamental, source of price pressure.

Corporate debt rated below investment grade, compensating investors for materially higher default risk with a meaningfully higher coupon/spread over Treasuries.

Real-world exampleA wave of exchange offers and consent solicitations (see Part I of this study set) is the typical operational path a distressed high-yield issuer takes to restructure outside formal bankruptcy.

A hybrid — a bond paying a below-market fixed coupon, but giving the holder the right to convert into a pre-set number of the issuer's common shares, letting the issuer borrow more cheaply in exchange for offering equity upside.

Real-world exampleHigh-growth technology companies have used convertible notes extensively to raise capital at a lower coupon than a straight bond, betting that share appreciation — not cash repayment — becomes the eventual outcome.

A bond whose coupon resets periodically (commonly quarterly) to a reference rate plus a fixed spread — historically LIBOR-based, now predominantly SOFR (US), €STR (EU), or SONIA (UK)-based post the 2021+ benchmark transition.

Real-world exampleThe 2021–2023 industry-wide LIBOR-to-SOFR transition required re-papering the reset mechanics of a huge stock of legacy FRNs — a landmark operational project across fixed income desks.

A bond with no periodic coupon at all, sold at a deep discount, with the entire return delivered as the gap between purchase price and par at maturity. Treasury STRIPS split an ordinary coupon-paying Treasury into individual coupon and principal cash flows, each traded separately as its own zero.

Real-world exampleZero-coupon Treasury STRIPS are commonly used to fund a known future liability with precision — a classic pension-liability-matching or education-funding use case.

A bond with no stated maturity date — the issuer pays coupons indefinitely (subject to any embedded call option) rather than ever repaying principal on a fixed schedule.

Real-world examplePerpetual structures are common in bank capital instruments (Subordinated Debt and CoCo bonds below), where regulators favour permanent, loss-absorbing capital over fixed-repayment debt.

Debt issued continuously off a shelf programme rather than as a single large syndicated deal — letting an issuer tailor maturity, currency, and coupon structure to specific investor demand, issuing smaller, more frequent tranches.

Real-world exampleMTN programmes are a core funding tool for banks and large corporates wanting continuous, flexible market access without launching a new benchmark deal every time.

Debt issued by a bank and secured by a ring-fenced pool of high-quality assets (typically mortgages or public-sector loans) remaining on the issuer's balance sheet — giving bondholders a dual claim: against the bank generally, and the specific collateral pool if the bank defaults.

Real-world exampleCovered bonds are a dominant bank funding tool in Germany, the Nordics, and France — historically far less common in the US, which relies more on securitization for similar needs.

Debt ranking below an issuer's senior unsecured debt in the repayment waterfall — subordinated bondholders are repaid only after senior creditors are made whole, compensated for that extra risk with a higher coupon.

Real-world exampleIn almost every corporate bankruptcy or bank resolution, subordinated bondholders recover a smaller percentage of face value than senior bondholders of the identical issuer.

A security representing an undivided interest in a pool of residential mortgages, where principal and interest paid by homeowners is "passed through" to bondholders monthly, guaranteed by a GSE (or, for Ginnie Mae, the full faith and credit of the US government).

Real-world exampleAgency MBS trades heavily in the "TBA" (to-be-announced) forward market, where the specific mortgage pool backing a trade isn't identified until shortly before settlement — a convention unique to this asset class.

A structured security built from a pool of mortgages (often itself built from Agency MBS pass-throughs), sliced into tranches with different priority claims on principal and interest — engineered to redistribute prepayment risk unevenly across tranches.

Real-world examplePAC (Planned Amortization Class) tranches are engineered to deliver a predictable principal schedule across a defined prepayment-speed range, shifting excess volatility onto companion tranches designed to absorb it.

Securitized debt backed by a pool of commercial real estate mortgages — office buildings, shopping centres, hotels, apartment complexes — structurally similar to a CMO but with meaningfully different underlying collateral risk drivers.

Real-world exampleOffice-sector CMBS became a closely watched stress point through the mid-2020s as elevated vacancy rates and refinancing challenges pressured the weakest office properties backing older deals.

Securitized debt backed by a pool of non-mortgage consumer or commercial receivables — auto loans, credit card receivables, student loans, or equipment leases are the most common underlying collateral.

Real-world exampleAuto loan ABS is one of the most consistently issued securitization segments, valued for its short duration and historically stable, well-understood loss patterns.

A structured vehicle holding a diversified pool of leveraged (typically sub-investment-grade) corporate loans, tranched from senior AAA-rated notes down through mezzanine and unrated equity — actively managed within defined limits, unlike the static pools typical of most ABS/MBS.

Real-world exampleThe CLO market grew into one of the largest buyers of the leveraged loan market through the 2010s–2020s, making CLO issuance volume a closely watched indicator of risk appetite in corporate credit.

A hybrid debt instrument whose return is linked to an underlying reference — an equity index, a basket of stocks, a commodity, or an interest rate — combining a bond wrapper with an embedded derivative, issued as unsecured debt of the issuing bank.

Real-world exampleStructured notes were explicitly named among the products that moved from T+2 to T+1 settlement in the US in May 2024, alongside corporate and municipal bonds.

Short-term, unsecured, discount debt issued by large, creditworthy corporations to fund immediate working-capital needs — functionally a corporate T-Bill, sold below face value with return coming from the discount.

Real-world exampleThe CP market's near-freeze during the 2008 crisis was severe enough that the Federal Reserve created an emergency facility specifically to backstop it — underlining how central CP is to everyday corporate cash management.

A time deposit issued by a bank paying a fixed rate for a fixed term, in exchange for the depositor agreeing not to withdraw funds before maturity (or facing an early-withdrawal penalty).

Real-world exampleBrokered CDs were explicitly included in the US market's May 2024 move from T+2 to T+1 settlement, alongside corporate and municipal bonds.

A short-term collateralized loan structured as a sale-and-repurchase: one party sells a security (usually a Treasury) for cash, agreeing to repurchase the identical security at a slightly higher price on a set future date — the price difference is the implicit interest, the "repo rate."

Real-world exampleThe Federal Reserve's own repo and reverse repo operations are a core monetary-policy tool, directly influencing short-term rates by adjusting how much cash is available in the overnight funding market.

A short-term instrument originally used to finance international trade — a time draft drawn on and guaranteed ("accepted") by a bank, becoming a negotiable money-market instrument that can be sold at a discount before maturity.

Real-world exampleBankers' acceptances were historically a dominant trade-finance instrument, though commercial paper and direct bank lending have displaced much of their former volume.

Conventional bonds distinguished not by cash-flow structure but by use of proceeds (green/social bonds fund specifically earmarked environmental or social projects) or by the issuer's own ESG performance (sustainability-linked bonds, where the coupon can step up if the issuer misses a stated target).

Real-world exampleSovereign green bond issuance has grown substantially since the mid-2010s, with a number of governments now issuing green bonds specifically to fund climate-related infrastructure alongside conventional programmes.

A Sharia-compliant financing instrument structured to avoid interest (riba), prohibited under Islamic law — a sukuk typically represents an ownership interest in a specific underlying asset or project, with "return" structured as a share of the asset's profit or rental income rather than interest.

Real-world exampleSukuk issuance is a major funding channel across the Gulf Cooperation Council states, Malaysia, and Indonesia, and has increasingly been used by non-Islamic issuers seeking to diversify their investor base.

A bond issued in a currency other than that of the market where it's issued and sold — a USD-denominated bond from a European company sold internationally, for instance — traded and settled internationally rather than through a single national market's infrastructure. ("Eurobond" predates and has nothing to do with the euro currency.)

Real-world exampleMany large multinationals and sovereigns maintain active Eurobond programmes specifically to access international investors and diversify their funding base beyond their home market.