These factors make fixed maturity securities and ideal choice for insurance companies, which typically invest 50-70% of their total invested assets in fixed maturity securities.
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Alternatively they can hold the securities to maturity, thus erasing the loss.
You buy a series of quality fixed-income securities with staggered maturity dates.
In October, the company restructured the securities so the original maturity date was extended, with half the principal balance being due on Feb. 15, and the rest on March 13.
As we have pointed out over the past year in our disclosures and quarterly calls, we have taken advantage of the dislocations in the European sovereign debt market by buying short dated debt in European peripherals and financing those securities to their exact maturity date.
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Bond traders thrive on playing the spreads between existing securities of comparable yield and maturity and the forthcoming issues.
He might wind up with a better annual return than that if the mortgage securities market recovers and he sells before maturity.
These forced write-downs on securities that are intended to be held to maturity exacerbate the crisis.
The mortgage securities the Fed bought during QE1 now reaching maturity will continue to be rolled over into Treasuries, as they have been since August.
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The National Development and Reform Commission, the top economic planning agency, is in charge of long-maturity bonds typically issued by major state-run enterprises, while the securities regulator runs a separate exchange-based bond market for listed firms.
The Bernanke Fed has been characterized by an aggressive attack on Treasury yields through all possible means: zero-bound interest rates with a pledge to keep them at record-lows for years to come, purchases of Treasuries and mortgage-backed securities through several programs of quantitative easing (QE), and a maturity extension program dubbed Operation Twist that should push longer-term rates even lower.
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Securities firms argue that this need not matter as long as investors hold the bonds to maturity.
Most analysts on Wall Street expect the Federal Reserve to announce QE3, another round of quantitative easing, where the Federal Reserve buys additional long maturity U.S. Treasuries, and Fannie Mae and Freddie Mac debentures and mortgage-backed securities.
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