Fixed Income Assets

RECENT NEWS
Mondo Visione  May 14  Comment 
Liquidnet, the global institutional trading network, today announced that Mark Taylor has joined the company as a senior member of the fixed income sales team. Mark will work with Constantinos Antoniades, Global Head of Fixed Income, Jonathan...
The Economic Times  May 11  Comment 
"In terms of fixed income, there are question marks on the medium-term outlook. But the equities or earnings outlook seems to be favourable."
MarketWatch  May 1  Comment 
After it late-2014 wobble, the asset class is now outperforming investment grade and Treasuries.
MarketWatch  May 1  Comment 
High-yield debt is top U.S. fixed-income performer in 2015
SeekingAlpha  Apr 28  Comment 
Mondo Visione  Apr 23  Comment 
Today the Ontario Securities Commission (OSC) published The Canadian Fixed Income Market Report and OSC Staff Notice 21-708 - OSC Staff Report on the Canadian Fixed Income Market and Next Steps to Enhance Regulation and Transparency of Fixed...
Mondo Visione  Apr 23  Comment 
smartTrade Technologies announces today that smart-FI™, its end-to-end trading solution designed for Fixed Income and OTC derivatives businesses, was awarded the best sell-side OTC Trading Initiative at the Sell-Side Technology Awards held by...




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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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