Tiêu đề LM04 Fixed-Income Markets for Corporate Issuers IFT Notes.pdf ✅

LM04 Fixed-Income Markets for Corporate Issuers 2025 Level I Notes © IFT. All rights reserved 1 LM04 Fixed-Income Markets for Corporate Issuers 1. Introduction ........................................................................................................................................................... 3 2. Short-Term Funding Alternatives ................................................................................................................. 3 External Loan Financing .................................................................................................................................. 3 External, Security-Based Financing ............................................................................................................. 4 Short-Term Funding Alternatives for Financial Institutions ............................................................. 4 3. Repurchase Agreements ................................................................................................................................... 6 4. Long-Term Corporate Debt ............................................................................................................................. 9 Summary ...................................................................................................................................................................12 Required disclaimer: IFT is a CFA Institute Prep Provider. Only CFA Institute Prep Providers are permitted to make use of CFA Institute copyrighted materials which are the building blocks of the exam. We are also required to create / use updated materials every year and this is validated by CFA Institute. Our products and services substantially cover the relevant curriculum and exam and this is validated by CFA Institute. In our advertising, any statement about the numbers of questions in our products and services relates to unique, original, proprietary questions. CFA Institute Prep Providers are forbidden from including CFA Institute official mock exam questions or any questions other than the end of reading questions within their products and services. CFA Institute does not endorse, promote, review or warrant the accuracy or quality of the product and services offered by IFT. CFA Institute®, CFA® and “Chartered Financial Analyst®” are trademarks owned by CFA Institute. © Copyright CFA Institute Version 1.0


LM04 Fixed-Income Markets for Corporate Issuers 2025 Level I Notes © IFT. All rights reserved 4 central bank funds market.  Assume a bank is running low on cash and a customer wants to withdraw money from this bank. The bank has two choices. It may withdraw cash from its reserve account in the central bank to pay the customer, if it has sufficient funds. Or it may borrow money from banks that have a surplus in their accounts at the central bank. The funds, known as central bank funds, may be borrowed for a period up to one year at rates known as central bank funds rates.  If the borrowing is for one day, it is called overnight funds. If it is for more than one day, then it is called term funds. Interbank Funds  Banks lend to and borrow from each other in the interbank market.  It is an unsecured system of lending.  The term may vary from overnight to one year.  The reference rate at which they borrow is called the interbank offered rate. Or, they may borrow at a fixed interest rate.  Often large banks publish two rates: one at which they borrow and one at which they lend. Certificates of Deposit  A certificate of deposit is a savings instrument with a maturity date, a fixed interest rate, and can be issued in any denomination. The investor or bearer of the certificate receives an interest at the end of the deposit period. CDs can be issued to individuals, companies, trusts, funds, etc.  There are two forms of CD: negotiable and non-negotiable CD.  In a non-negotiable CD, the interest and deposit are paid at maturity. There is a penalty if the depositor withdraws funds before maturity.  In a negotiable CD, depositors are allowed to sell the deposits before maturity.  There are two types of negotiable CDs: o Large-denomination CDs: CDs of denomination of $1 million or more; often traded among institutional investors. o Small-denomination CDs: of lower denominations and meant for retail investors. Commercial paper  Like non-financial corporations, banks may also issue unsecured commercial papers.  Some banks and financial institutions also commonly issue a secured form of commercial paper known as “asset-backed commercial paper” (ABCP). This financing is not recorded on the balance sheet of the issuer and provides benefits to both the bank and investors. When the commercial paper is issued, the bank receives cash and reduces its capital costs by providing undrawn backup liquidity rather than holding