Module 4 · Fixed Income

Fixed-Income Markets for Corporate Issuers

EN: Short-term funding (commercial paper, CDs, repo) and long-term corporate bonds.
VN: Tài trợ ngắn hạn (CP, CD, repo) và trái phiếu doanh nghiệp dài hạn.

1. Short-Term Corporate Funding Concept

Commercial paper Unsecured promissory note, ≤ 270 days, large blue-chip firms.
CD Certificate of deposit — bank-issued, negotiable for large denominations.
Repo Repurchase agreement — sell securities + agreement to buy back. Effectively a collateralized loan.
Repo rate Interest implied in the price difference between sale and repurchase.

2. Long-Term Corporate Bonds Concept

Investment grade ≥ BBB− (S&P) / Baa3 (Moody's). Lower yield, lower default risk.
High-yield (junk) < BBB−. Higher yield, higher default risk.
Senior secured Highest priority, backed by collateral.
Senior unsecured Standard.
Subordinated Lower priority in liquidation, higher yield.

Practice problem Practice

Practice problem

A blue-chip corporation needs $100M to fund inventory for 90 days. Which short-term instrument is most efficient?

Show solution

Commercial paper: unsecured, ≤ 270 days, for high-grade issuers; cheap.

Bank LoC also possible but typically more expensive.

Repo for collateralized funding — but CP is most direct.

Commercial paper