1. The Primary Market & The Secondary Market - International Finance Professor : Jasper Kim Y. Park (Y. Piao)

2. Contents 1. Types of Treasury Securities 2. The Primary Market 3. The Secondary Market 4. Regulation of the Secondary Market 5. Stripped Treasury Securities 6. Federal Agency Securities 7. Non-U.S. Government Bond Markets

3. 1.Types of Treasury Securities 1. Coupon Securities – pay interest every 6 months + principal at maturity (2year<Treasury Notes<10 year, Treasury Bond>10yer) 2. Discount Securities – pay only a contractually fixed amount at maturity 3. Treasury Inflation Protection Securities (TIPS,1997) - adjust for inflation

4. 2.The Primary Market 1. Auction Cycles 2. Determination of the Results of an Auction 3. “Dutch Auction” 4. Bid-to-Cover ration 5. Primary Dealers 6. Reporting Dealer ( reporting dealer primary dealer) 7. Submission of Bids

5. 3.The Secondary Market 1. Over-the-Counter 2. New York, London, Tokyo 3. When-Issued Market (wi market) 4. Government Brokers interdealer broker- speed & efficiency 5. Buybacks

6. 4.Regulation of the Secondary Market 1.The Government Securities Act of 1986 (GSA) - to protect investors and to ensure the maintenance of a fair, honest, and liquid government securities market. - deals with the transparency of the GSM. 2. The Government Securities Act Amendments of 1993 (GSAA)

7. 5.Stripped Treasury Securities 1.Coupon Stripping 2.Trademark zero-coupon Treasury securities 3.Treasury receipts (TRs) 4.Spearate Trading of Registered Interest and Principal of Securities (STRIPS,1985) 5.Treasury strips, coupon strips, principal strips

8. 6.Federal Agency Securities 1.Federally related institutions (government-owned agencies) - not issue securities directly 2.Governemnt-sponsored enterprises (GSEs) - publicly chartered entities - to reduce the cost of capital

9. 7.Non-U.S. Government Bond Markets 1.U.S. Bond Market 2.Major- Japan,Germany,France,U.K.,Italy,Spain,Belgium, Holland,Sweden,and Denmark. 3.Germany-Benchmark interest rate in Europe 4.Methods of Distribution (1).regular auction calendar/Dutch-style system (2).regular calendar auction/minimum-price offering system (3).ad hoc auction system (4).tap system

10. Thank you!