Fixed-Income Markets for Corporate Issuers
2025 Curriculum
CFA® Program Level I
Fixed Income
Refresher reading access
Overview
Previous modules described various types of fixed-income issuers and investors. In this module, we focus on the corporate fixed-income sector, composed of instruments issued by financial institutions and non-financial corporate issuers across the time-to-maturity and credit spectrums. These instruments account for a significant portion of total debt issuance and debt outstanding globally.
- Non-financial corporations frequently use short-term external funding in the form of bank loans and securities, such as commercial paper to meet cash needs.
- Financial institutions rely on deposits, interbank markets, commercial paper, and repurchase agreements (repos) as primary sources of shortterm funding.
- Commercial paper is a short-term unsecured promissory note issued by both financial institutions and non-financial corporations.
- A repurchase agreement (repo) is a form of short-term secured lending that involves the sale and simultaneous agreement to buy back a security at a pre-agreed future price.
- An investment-grade bond has a significant proportion of its yield-to-maturity (YTM) attributed to the government benchmark yield due to its strong ability to meet promised interest and principal obligations from operating cash flows.
- High-yield issuers are characterized by a higher expected likelihood of financial distress. Relative to investment-grade bonds, a higher proportion of their bonds’ YTM is attributed to an issuer-specific spread over the government benchmark yield.
Learning outcomes
The candidate should be able to:
- compare short-term funding alternatives available to corporations and financial institutions;
- describe repurchase agreements (repos), their uses, and their benefits and risks;
- contrast the long-term funding of investment-grade versus high-yield corporate issuers.
1 PL Credit
If you are a CFA Institute member don’t forget to record Professional Learning (PL) credit from reading this article.