secondary bond market

[danlan]

Schweser Exam 1, 14.6
In evaluating relative valuation methodologies, which rationales for trading in the secondary bond market is not appropriate?
A. Cash flow reinvestment
B. New issue swaps
C. Structure trades
D. Seasonality
Why the answer is D?

 

[sticky]

seasonality is the rationale for NOT trading. You won’t have secondary market trading due to this.
- sticky

 

[CFAAtlanta]

If I recall correctly, seasonality here refers to the issuance of new debt, i.e . the primary market. Most companies issue new debt in the first quarter.

 

[ws]

According to the material, seasonality was due to end of quarter, PM are busy with reporting, no time to trade.

 

[ymmt]

Agree w/ ws. This can also be somewhat firm specific too (end of fiscal year, etc).

 

[abacus]

In my opinion, its not a good question. Basically, the Q is asking if seasonality is a valid reason for not trading. More like a behavior finance Q than a FI question.

 

[sticky]

CFAAtlanta Wrote:
——————————————————-
> If I recall correctly, seasonality here refers to
> the issuance of new debt, i.e . the primary
> market. Most companies issue new debt in the first
> quarter.
this is NOT seasonality. This is cyclical changes with the primary market (p.52, Schweser #3). ws was correct.
- sticky