Module 5 · Fixed Income

Fixed-Income Markets for Government Issuers

EN: Sovereigns, agencies, supranationals, and quasi-government issuance.
VN: Trái phiếu chính phủ, agency, tổ chức siêu quốc gia.

1. Government Issuer Types Concept

Sovereign National governments (US Treasuries, JGB, Bunds, Gilts, OATs).
Quasi-gov Agencies (Fannie/Freddie), state and local govts (munis).
Supranational World Bank, IMF, IBRD, ADB.

2. US Treasury Instruments Concept

T-bill ≤ 1 year, zero-coupon, sold at discount.
T-note 2–10 years, semi-annual coupon.
T-bond > 10 years (20, 30 years), semi-annual coupon.
TIPS Inflation-protected — principal adjusts with CPI.
FRN Floating-rate Treasury (rare).

3. Tax Treatment Concept

Treasuries Subject to federal tax; exempt from state & local.
Munis Tax-exempt federal income; some are also state-exempt.
Corporate Subject to all levels of tax.

Practice problem Practice

Practice problem

A Texas resident in the 35% federal bracket compares two bonds: a 4% Treasury and a 3% Texas muni (state-tax-free). Which yields more after tax?

Show solution

Treasury after-tax: 4% × (1 − 0.35) = 2.60%

Muni: 3% (federal tax-exempt)

Muni wins (3.00% > 2.60%).