vania-janet/multiturn-rag-retrieval-data huggingface dataset:
who issued stock typically support it when the stock price go down.  No, not many company do that as it is uneconomical for them to do so. Money used up in buying back equity is a wasteful use of a firm's capital, unless it is doing a buyback to return money to shareholders. Does the same thing happen with government bonds?  Not necessarily again here. Bond trading is very different from equities trading. There are conditions specified in the offer document on when an issuer can recall bonds(to jack up the price of an oversold bond), even government bonds have them.  The actions of the government has a bigger ripple effect as compared to a firm. The government can start buying back bonds to increase it's price, but it will stoke inflation because of the increase in the supply of money in the market, which may or mayn't be desirable. Then again people holding the bond would have to incentivized to sell the bond. Even during the Greek fiasco, the Greek government wasn't buying Greek bonds as it had no capital to buy. Printing more euros wasn't an option as no assets to back the newly printed money and the ECB would have stopped them from being accepted.  And generally buying back isn't useful, because they have to return the principal(which might run into billions, invested in long term projects by the government and cannot be liquidated immediately) while servicing a bond is cheaper and investing the proceeds from the bond sale is more useful while being invested in long term projects. The government can just roll over the bonds with a new issue and refrain from returning the capital till it is in a position to do so.
The most common usage of interest rate swaps is by corporates who issue bonds.  Most US investors (e.g. insurance companies &amp; pensions) want fixed-rate bonds, so that they know what their interest income will be for the life of the investment.  Many financial issuers prefer to have their liabilities be floating rate, so that they will benefit if the Fed keep interest rates at zero for a long time.  So the financial issuer issues the fixed rate bond, the insurance company buys it, and the issuer converts the obligation to floating with an interest rate swap.
Since the bondholders have voted to reject the emergency manager's plan, which would have paid them pennies on the dollar, the city is now attempting to discharge its short-term and long-term debt. If they get what they want in court, it is likely these bonds will become worthless. Even if they are only able to restructure the debt, its likely that bondholders will need to accept large concessions. However, this may not be immediately reflected in bond prices as it's very possible that the market for these bonds will be very limited in terms of who they could sell them to. If you were to buy them now , that would be a bet on some outcome other than bankruptcy and the discharge of the city's long-term obligations. President Obama has already stated that he monitoring the situation, and it seems unlikely to me that after all of the support given to the auto industry in the last several years that the federal government will do nothing, if only to avert job losses. However, I think it's likely that state aid will be limited at best, as Michigan's economy has been struggling for a number of years. There aren't many large precedents to look at for guidance. One of the largest public entities to declare bankruptcy, Orange County, was a very different situation because this was due to malfeasance on the part of its investment manager, whereas Detroit's situation is a much larger structural problem with its declining economy and tax base. I think the key question will be whether the Federal Government will consider a Detroit bankruptcy to be a large enough embarassment/failure to take significant action.
"Why does the yield go up if the country is economically unstable? The yield will rise when instability increases because the risk of default increases.  If the case of Greece, the instability of government finances resulted in a 50% ""haircut"" for bond holders in 2011.  In other words, bond holders suffered a 50% write down in the nominal value of their bonds.  This means that holding these bonds until maturity will mean they will only receive half of the original nominal value of the bond, and that is assuming no further write downs occur. Why does selling a bond drive up the yield? Significant selling of bonds means that sellers are worried about future prospects.  Sellers will outnumber buyers, so sellers will have to reduce their offer price in order to attract new buyers. So if you think Greece is not going to default as it's highly likely a country would completely default, wouldn't it make sense to hold onto the bonds? If you think that it is highly unlikely that Greece will default and the prices and yields are attractive, then Greek bonds may look like an attractive investment. However, keep in mind the fate of bond holders in 2011.  They were attracted to Greek bonds by the price and yield, but they suffered a 50% haircut."
When individuals take on a loan, it's often in the form of a mortgage, right? And companies take out business loans all the time, only they might be a regular bank loan and not in the form of buying bonds, more similar to when an individual takes a loan.  I was seeing through what process a firm would have to go through in order to get funding via the bond process.
Personally, I'm a big fan of second price auctions anyway. It seems that applying that structure to this market would drop the incentive to get any sort of last look or any of the other collusion coming from these bid rigging schemes. Also, it seems like this is buy side collusion which is really strange. Generally it's considered a good thing when the price of goods drops closer to the marginal cost. In general, any points that a municipality gets on the money above what they're paying on the bond issue is a good thing. The less the banks have to pay to borrow those funds in the short term, the less they can loan them out for.
Running a fiscal deficit means a government is spending more money than it is taking in as taxes, fees, penalties, fines, etc, with the extra money that is being spent being borrowed by selling bonds to willing buyers.  Interest paid to said buyers is another government expense in future years, and of course, the bonds must ultimately be redeemed and the buyers paid off.  The buyers of the bonds must have some confidence that they will get the interest they have been promised as well as be paid off ultimately.  As the government's indebtedness increases, buyers are likely to demand higher interest rates as inducements to buy the bonds. And so it goes...
Real basic bond question: When a future on Gov bonds get tendered, a physical bond is delivered. Since 'bonds' are generally in denoms of $100, does the physical delivery always have to be in sets of 100, ie there can't be partial delivery of bonds?
sorry I disagree, they buy government bonds currently held by private banks (who hold them for account holders), this increased demand for government bonds means that the yield on them decreases, this means the government can then borrow at a lower rate (providing the QE isn't offset by a fall in private demand for bonds as they may be seen as unrewarding in terms of the risk taken), private investors will then turn to other investments offering a greater return, this will then increase the capital stock available and expand output, thus increasing employment
The firms the government chooses as suited enough to pay taxes basically means the government still has the final decision on which ""currency"" (bonds) to accept. What if the government then decides only ONE corp is suited to do this job, or only two? Then it's functionally no different than teh current situation. Right now, the world buys USD bonds at extremely low interest rates, and this helps fund our government and keeps our nations costs very low. Under your scenario, the government is saying ""We accept bonds from X, Y, or Z"", and so instead the world runs out to buy XYZ bonds at extremely low interest rates. Instead of giving our country the funding it needs, we're actually giving XYZ corps the low interest rates. This is basically the same downfall of letting the big banks run the student loan program: it gives the firms more power, the government less power, costs us more tax dollars, and gives those firms an undeserved higher place on the food chain. I quite simply disagree with it. I would rather our government print the bonds themselves and take the benefit of the low cost of borrowing, rather than giving XYZ corps more favorable funding to continue world-wide expansion and takeover. Furthermore, if XYZ corps are approved by the government for paying tax dollars, what do we do in the case of a fiscal emergency such as 2007 when AIG basically went bankrupt in a period of only a few months? Of course this would be SURE to happen only right AFTER tax day, AFTER the entire country buys AIG bonds, pays the government in AIG bonds, and the executives of AIG pay themselves HUGE bonuses. Then they go bankrupt, and the government is left holding ALL the IOU's which are worthless. And of course, traders, hedgers, goldman sachs, etc, would all know AIG was about to get fucked and would make trillions while the US Gov received all tax receipts in worthless paper. The fact is, with the speed big companies can fall down under the weight of their own contradictions, the danger is all too real that a full year of tax receipts simply disappears."
"There are tax free bonds in the United States.  They are for things like public housing and other urban projects.  They are tax free for everyone but only rich people buy them.  Why?   The issue is that the tax free nature of the bond is included in its yield.  So rather than yielding say a 5% return, they figure that the owner is getting 20% off due to not paying taxes.  As a result, they only give a 4% return but are as risky as a 5% return investment.  Net result, only rich people invest in tax free bonds.  ""Rich"" is defined here to mean people paying a 20% tax on long term investment returns.   Or take the State and Local Tax (SALT) deduction, which has been in the news recently.  Again, it is technically open to everyone.  But there is also a standard deduction that is open to everyone.  For the typical family, state and local taxes might be 5% of income.  So for a family making $100k a year, that's $5k.  The same family can take a $13k or so standard deduction instead of itemizing.  So why would they take the smaller deduction?   As a practical matter, two groups take the SALT deduction.  People rich enough to pay more than $13k in state and local taxes and people who also take the mortgage interest deduction.  So it helps a lot of people who are rich quite a bit.  And it helps a few middle class people some.   But if you are lower middle class with a $30k mortgage on a tiny house and paying 4% interest, then that's only $1200 a year.  Add in property taxes of $3000 and SALT of $2.8k and that's only $7k.  Even if the person gives $3k to charity, the $13k deduction is a lot better and requires less paperwork.   Contrast that with someone who has $500k mortgage at 3.6% interest.  That's $18k in interest alone.  Add in a SALT of $7k and property taxes of $50k, and there's $75k of itemized deductions, much better than $13k.  Now a $7k donation to charity is entirely deductible.  And even after the mortgage interest deduction goes away, the other $64k remains."
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"In both cases, you have a bunch of assets that pay into a trust, and a set of rules determining how the payments are distributed to bond holders.    Typically, the bonds are split up by ""Seniority"" where any losses from the underlying assets gets recognized by the least senior bond holder first, and the most senior is protected until those below in seniority are wiped out.  In the case of mortgage backed securities, you have a lot of early payoffs (sales and refinances), and those payoffs tend to pay off the senior bonds first (though in practice, quite a bit more complicated than that)  CDOs tend to have bonds as assets that pay into the trust, and CMOs have mortgages.  CDOs used to be more likely to be things like corporate debt, or junk-rated debt.  But during the housing bubble you did have CDOs backed by some form of mortgage backed bonds.  If you build a CDO out of tranches of CMOs, you are going through multiple stages of tranching, and things 'get weird' when you have highly-correlated loss behavior in your underlying assets.  The Equity position or the residual, as it is sometimes called, is whatever money coming from the underlying assets isn't owed to any bond after all of the structuring rules are followed.  This would be interest received in excess to interest owed + money required to make up for lost principal.  Typically goes back to the issuing bank.  There is something called a NIM bond that gets carved out of the residual and pays to the investment bank, I gather.  Residuals and NIMs of mortgage bonds are pretty worthless in a high loss environment like this."
"The problems with ratings and the interpretation of ratings is that they are retrospective, and most people read them as prospective. They basically tell you that debtor is solvent right now. What does that mean? It means that the ratings are based on the audited financial statements of a company, government or other organization issuing debt. So, in the best case scenario where the rating agency is acting properly, they are still dependent on folks with fiduciary responsibility telling the truth. And even if they are telling the ""truth"", accounting rules make it possible to obscure problems for years in some cases. Municipal goverments are a great example of this... the general obligation bonds cities and even states with deep structural budget problems still get good ratings, because they are solvent and have sufficient operating cash to meet obligations today. But towards the end of a 30-year bond's life, that may not be the case anymore unless they dramatically alter their budgets. At the end of the day, ratings are one aspect of due diligence. They are useful screening devices, but you need to understand who you are lending money to by purchasing bonds and diversify your holdings to protect your wealth.  The problem, of course, is when the trustees of your pension fund invests in garbage assets after getting a sales pitch on the beach in Hawaii, then conveniently place all of the blame for that bad investment on the rating agency. You unfortunately have zero control over that."
Perfect competition would not be the outcome you want from this model, nor does it imply what you posit. It implies that there will be infinitely many firms, with free entry/exit, making zero profits. Bonds would then become a reason for exit if you had heterogeneous firms (but in perfect competition this is unlikely). In fact in equilibrium no would (probably) issue bonds. What it seems like you want is some sort of structured oligopoly, or a regulated cartel separated into regions. This might generate the bond market you have in mind, but it still does not take into account the relative risk of the bonds.
Usually Bonds are used to raised capital when a lender doesn't want to take on sole risk of lending. If you are looking at raising anything below 10m bonds are not a option because the bank will just extend you a line of credit.
"This is the best tl;dr I could make, [original](https://www.bloomberg.com/news/articles/2017-05-25/investors-say-it-s-time-to-price-climate-into-cities-bond-risks) reduced by 95%. (I'm a bot) ***** &gt; Municipal defaults are rare: Moody&amp;#039;s reports fewer than 100 defaults by municipal borrowers it rated between 1970 and 2014.  &gt; Kurt Forsgren, a managing director at S&amp;P, said its municipal ratings remain &amp;quot;Largely driven by financial performance.&amp;quot; He said the company was looking for ways to account for climate change in ratings, including through a city&amp;#039;s ability to access insurance.  &gt; Laskey, of Fitch, was skeptical that rating companies could or should account for climate risk in municipal ratings.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6ejcgp/rising_seas_may_wipe_out_these_jersey_towns_but/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~133538 tl;drs so far."") | [Theory](http://np.reddit.com/r/autotldr/comments/31bfht/theory_autotldr_concept/) | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **rated**^#1 **climate**^#2 **risk**^#3 **bond**^#4 **change**^#5"
I've often thought that would be a great idea for pensions here in the states, specifically municipal pensions. Like a particular town could invest a small portion of it's money into local businesses and real estate. That would benefit the local economy and incentivize pensioners and workers to patronize those businesses.  Does anyone know if this is done anywhere?
Yeah my question was just out of curiosity. Though I do wonder, given that bond prices are so low, they inevitably will have to go up right? So why does anyone bother to buy them in the first place?
In a nutshell...in order to file for Chapter 9 bankruptcy, the city or county first has to actually be insolvent, the state has to give authorization for the city or county to file, and the city or county must have made an attempt to negotiate with creditors (bondholders, pensioners etc). Once those conditions are met, and they must be specifically met, the city or county files the bankruptcy petition and the automatic stay typically goes into effect shortly after. This stay basically allows the municipality to stop making payments on some of their obligations throughout the course of the bankruptcy case. Chapter 9 bankruptcies are usually very protracted, and very expensive. So fast forward a year or two, the creditors that are owed money have all been assigned to different classes by the bankruptcy court, with each class getting a specific recovery based on the type of creditor. The city or county has the sole right to propose a plan of reorganization. Some debts, such as a bond backed specifically by revenues generated by a sales tax, are usually considered special revenues and secured...those bondholders will have first priority on those revenues pledged to them throughout the bankruptcy process and are usually unimpaired. Other creditors, such as general obligation bondholders or employee pension plans, are usually considered unsecured and will not receive their contractually obligated payments during the bankruptcy process, and will likely have to take a haircut on the principal amount they are owed by the city or county. The municipality must be solvent in order to advance the plan of reorganization and exit the bankruptcy process, so quite often employee contracts are adjusted, services will be reduced, pension and OPEB promises to retired workers will be curtailed, and bonded debt is reduced to a manageable level. It's not pretty, and it is very expensive.
One reason that a bond can be significantly less than face value is because people are seeking better investments elsewhere, so for example if a bond doesn't mature for another 10 years, that 20% increase in face value isn't very attractive when compared to say leaving your money in the stock market for 10 years. Another reason could be that the credit-worthiness of the issuer has collapsed and people expect that there is a fairly good chance they are not going to make the payment. This could be what you would see if for example it was a one year time until maturity, but it has a value of 40% of the face value. There is a risk, because they can simply not pay. For example people who bought Greek bonds.
Their revenue comes from the investors, bond purchasers, not the companies issuing bonds, unlike the S&amp;P/ Fitch/ Moody's ""business model"". So there is an alternative, which I consider hopeful and reason not to totally despair. EDIT: What xcrunna19 mentions is also totally accurate. The part about Nouriel Roubini (who is a professor at N.Y.U. or Columbia or such and a sensible though slightly high strung sort) is consistent with my impression. As for whether it would require government action to implement the changes advocated by Roubini, yes, I guess it would, but I don't know if the government would do that. It would be better if the credit ratings agencies would find their own way to a different, less conflicted payment-incentive model. Keep in mind too that many of the provisions of Dodd-Frank have removed the existing regulatory requirements for credit ratings on bonds and other securities. This is the scary part though: There isn't anything to replace the credit ratings agencies, not at the moment, as far as I can tell! Eventually the government is supposed to come up with an alternative, but that hasn't happened yet. Which is better: Not requiring ratings at all, or the past situation of sometimes inflated ratings, which imparted a false sense of confidence? I don't know."
How would you compute the earnings for governments that are some of the main issuers of bonds and debt? When governments run deficits they would have a negative earnings ratio that makes the calculation quite hard to evaluate.
The reason your scheme fails is because you're attempting to make all bonds trade at their face value plus interest, regardless of the credit of the issuer. In all of your examples, you're suggesting I can pay my bill to the electric company using bonds from XYZ corp. Does my electric company have a right to refuse XYZ Corp bonds as payment and demand other payment?  If they do have a right to refuse payment, it is almost a certainty my electric company will have no interest in poring over the books of XYZ Corp or MomAndPop's Country Diner in order to decide whether they accept or reject the payment. They will simply reject it and demand cash.   If they can NOT refuse to accept the payment, then you will immediately have all sorts of shell corps who's only purpose is to accumulate debt and act as a free money printing press for some other shadowy entity.   In both cases, your plan fails.
A debenture is a security document. This means that the bond is secured over assets. Under English law, you can issue bonds which, if defaulted upon, you can enforce your security against the issuer (i.e. the company), which means you can attempt to get your money back by getting hold of the company's assets.   As for a floating charge, I'll first explain what a fixed charge is. Say you're a bank (a lender) and you lend £1000 to X. You take security by way of a fixed charge over X's photocopy machines. X is unable to dispose of the machines without the lender's consent. This means that if X cannot pay up the loan, you can enforce security by taking possession of the photocopy machines, sell them, and hopefully get enough money back to cover the default.  A floating charge works the same way but over assets which fluctuate, e.g. X's stock of potatoes. X sells potatoes to supermarkets all the time so you can't just take a fixed charge over it for practical reasons, you can't just ask the lender each time you want to sell a potato. When an event of default occurs, i.e. you don't pay back the loan or breach a condition of the loan agreement, the floating charge crystallises, and becomes a fixed charge, thus enabling the lender to sell the potatoes to get their money back.  Random examples, but makes sense?  Source; future English solicitor.