Fixed Income Assets

RECENT NEWS
Mondo Visione  Jun 22  Comment 
SIFMA has confirmed its previous holiday recommendations for the trading of U.S. dollar-denominated fixed-income securities in the  U.S .,  UK  and  Japan  in observance of the U.S. Independence Day Holiday. 
Mondo Visione  Jun 8  Comment 
Abel Noser Solutions, the global leader in Transaction Cost Analysis ("TCA") in equities, preferreds, FX and futures, is pleased to announce coverage of a new asset class: fixed income. This offering complements Abel Noser Solutions' existing...
Forbes  Jun 5  Comment 
Individual investors’ fixed-income allocations fell to a two-year low last month.
Banking Business Review  May 31  Comment 
Citi has agreed to divest its fixed income analytics and index businesses to London Stock Exchange Group (LSEG) for $685m.
Channel News Asia  May 30  Comment 
London Stock Exchange (LSE) has agreed to buy Citigroup's fixed-income analytics platform and index business for US$685 million in cash, the companies said on Tuesday.
Motley Fool  May 20  Comment 
Do you know the risks involved with bond investing, or how interest rates can affect your investments?




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Fixed Income assets refer to assets that provide their owners with a fixed stream of income. Bonds are the most common example of a fixed income asset. Companies and government entities will issue bonds or IOUs to investors. These bonds typically pay a fixed rate of interest or coupon rate to investors for a fixed period of time, thus the name fixed income. At the end of the period, the investor receives his principal (the orginal amount of money paid for the bond).

Ratings and Risk

Fixed income assets typically receive ratings from major ratings agencies. These ratings signify the amount of risk represented by the assets. For instance a U.S. treasury bond which is considered to be one of the safest investments, carries a AAA rating, some states likewise carry high ratings. The higher the rating of the bond issuer, the lower the rate of interest required by the purchasers. A smaller, less established company, for instance, might only have a rating of BBB, and would have to pay bond investors significantly higher annual interest rates. Bonds with exceptionally low ratings are known as junk bonds and typically pay the highest interest rates--sometimes in the double digits.

Equities vs. Bonds

Equities and bonds are the two major asset classes available to investors. While there are others (real estate, private equity, and venture capital) these two classes are very common and extremely liquid (can be converted to cash easily). Equities are typically considered to be the riskier of the two asset types (with the exception junk bonds and other lowly rate bonds) and have traditionally generated higher returns than fixed income assets.

Returns

Fixed income assets historically have had a much lower rate of return than stocks (equities). This is because with


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