Introduction
Welcome to Debt Instruments, the largest and most diverse fixed-income topic on the SIE exam.
Exam Weight: Part of 33 questions (44% of the exam), Products & Risks
What You'll Learn
- T-Bills, T-Notes, T-Bonds, TIPS, and STRIPS as the safest investments in the market
- Government-sponsored enterprises, mortgage-backed securities, and CMOs
- Secured and unsecured corporate debt, zero-coupon bonds, and high-yield bonds
- General obligation bonds vs. revenue bonds, tax exemptions, and official statements
- Commercial paper, bankers' acceptances, repos, and certificates of deposit
- Par value, coupon rates, and the four yield measures every bond investor needs
- The inverse relationship between bond prices and interest rates
- Investment grade vs. speculative grade ratings and the rating agency scales
- How issuers and investors benefit from callable and convertible bond features
- How negotiated and competitive offerings bring different bonds to market
Why This Matters
Debt securities make up the largest segment of the global capital markets, far larger than equities. Understanding how bonds work, how they're priced, and what risks they carry is fundamental to the securities industry. The SIE exam tests this topic frequently, especially the distinctions between bond types, yield relationships, and credit ratings.
Let's start with Treasury securities, the benchmark against which all other bonds are measured.