[Overview]
Just like all types of investments, there is a balance between the risk you are willing to take and the potential returns you can earn when investing in bonds. Generally, greater potential returns or rewards are associated with higher risk. The key variables that can impact the risk profile of bonds include price, interest rates, yield, maturity, liquidity, redemption features, creditworthiness, and tax status, among others. All of these factors contribute to the value of a bond and should be considered when determining whether it is a suitable investment for your portfolio.

Regardless of the type of bond you are considering for investment, it's important to research both the bond and the issuer. Reviewing the investment prospectus, official statements, financial condition statements, or any amendments to these types of documents is crucial. All this information can be found on public websites and should be a part of your investment decision-making process.

Understanding how bond markets work is crucial to grasping the impact that market risks can have on your investment.

[Interest Rates & Zero-Coupon Bonds]
Bonds can pay interest in various ways. This interest can be paid periodically or at maturity.

Fixed: This type of bond has a nominal interest rate that is set at the time of issuance and remains fixed until maturity. It's generally a certain percentage of the face value (principal) and interest may be paid monthly, annually, or semi-annually.

Stepped: Step-up coupon bonds typically pay a fixed interest rate until a specified call date, assuming the bond is not called. The rate then steps up to a higher level.

Variable: Variable-rate bonds have a nominal rate that resets periodically based on a benchmark interest rate index. This reset can occur multiple times a year. The coupon and the benchmark may also be inversely related.

Zero-Coupon: This type of bond does not pay interest periodically. Instead, investors purchase the bond at a discounted price that reflects its present value based on the bond's interest rate (original issue discount). Payment is received only once, at maturity, and consists of the invested principal plus accrued interest (compounded annually until maturity). Because both the accrued interest and the principal are paid only at maturity, the price of this type of bond is more sensitive to interest rate fluctuations. If the bond is subject to taxation, the interest is taxed as it accrues, even though it is not paid to the investor until maturity or redemption.

Note: Variable-rate bonds and adjustable-rate bonds may have caps and floors on the coupon reset rates.

[Maturity]
The maturity date refers to the day when the principal of a bond is due to be paid back. Typically, this period ranges from 1 year to 30 years.

[Yield]
Yield is the rate of return an investor expects from a bond based on the purchase price and the interest payments received, assuming the bond is held until its maturity date or call date.

Current Yield: The current yield is equal to the bond's annual interest payment divided by its current market price. For example, if a bond with a face value of $1,000 is currently priced at $1,000 and has an annual interest payment of $70, the current yield would be 7%.

Yield to Maturity: This is the expected rate of return on a bond if it is held until its maturity date. The calculation considers the purchase price, face value, coupon interest rate, and time to maturity. It assumes that all coupon payments are reinvested at the same rate.

Yield to Call: This is the bond yield assuming that the issuer will redeem the bond on a specific call date. The calculation considers the current market price, the call price, coupon rate, and the period until the call date.

Worst-Case Yield: This represents the lowest potential yield that is expected from the bond. Bonds are typically bid or offered based on the yield for the worst-case scenario.

[Credit Rating]
Macqwerty provides current opinions on the creditworthiness or relative credit risk of each issuer for each symbol. These are evaluations from three major in-house, independent rating services within Macqwerty that assess the ability of a bond issuer to make timely payments of principal and interest.

[Risks Associated with Individual Bonds]
Certain specific risks, including but not limited to the following, can apply to bonds:

Default Risk: This is the risk that the bond issuer fails to make interest or principal payments by the bond's maturity date. This can occur due to issuer bankruptcy, reporting failures, or failure to meet other provisions in the bond contract like debt service reserve requirements. Bondholders are creditors of the issuer, so in the event of a default, they have a higher claim on the issuer's assets than shareholders during liquidation or restructuring. Additionally, among all of an issuer's bondholders, there are different levels of payment priority, which is determined by the type of bond held.

[Credit Risk]
Credit risk of a bond is an important consideration when evaluating investment choices. Credit rating agencies may assign a credit rating to the bond and/or the issuer based on an analysis of the issuer's financial condition, management, economic and debt characteristics, and specific revenue sources securing the bond. Bonds with lower ratings are considered to be high-risk or speculative and may offer higher yields. Lower-rated bonds often carry higher yields to compensate investors for increased risk. When evaluating potential bond investments, consider your risk tolerance. For municipal bonds, the issuer may pay premiums to insurers, who are responsible for paying the interest and principal if the issuer fails to do so. These insured bonds may have higher credit ratings than the issuer. To evaluate a bond's credit risk profile more completely, it's good to evaluate both the insurer's and the issuer's ratings. These are sometimes also referred to as the base ratings. If a rating agency changes the rating for a particular bond or issuer for any reason, the market price and yield of that bond are also likely to change.

[Legal Disclaimer]
Reproduction and distribution of third-party content in any form is prohibited without the prior written consent of the third party. The third-party content provider does not guarantee the accuracy, completeness, timeliness, or availability of any information, including ratings. They are not responsible for any errors or omissions (negligent or otherwise) or for the results obtained from the use of such content. Third-party content providers give no express or implied warranties, including but not limited to any warranties of merchantability or fitness for a particular purpose or use. They are not liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs or losses caused by negligence). Credit ratings are opinions and are not statements of fact or recommendations to buy, hold, or sell securities. This document does not address the suitability of securities for investment purposes and should not be relied upon for investment advice.

Liquidity Risk: Investors are affected by various factors that influence their ability to sell a bond before its maturity and the price they'll receive for it. The most crucial variables are changes in the credit rating of the bond issuer and general interest rate fluctuations. The original size of the bond issue can also affect liquidity. Bonds generally have higher liquidity in the initial period following their issuance, primarily because that's when most trading occurs. The type of individual bonds also determines liquidity.

Interest Rate Risk: Changes in interest rates almost always affect bond prices. When interest rates rise, the prices of existing bonds typically fall. If you sell bonds in this type of interest rate environment, you are likely to receive less than what you paid for them. The volatility due to interest rate risk is higher for long-term bonds and generally decreases as the bond approaches maturity.

Call Provision: Bonds may have a callable feature that allows or requires the issuer to redeem the bond before its maturity at a specified price and date. Because call provisions protect the issuer, callable bonds usually offer a higher yield to compensate the investor for the risk of having to reinvest the proceeds at a lower interest rate. Bonds are often called after issuance if interest rates fall. Investors considering purchasing callable bonds should be aware that due to the call option, they might face lower-than-expected returns or even losses. Investors may also face reinvestment risks discussed later in this document. They should also be aware of special redemption provisions triggered by one-time events, as specified in the offering memorandum. These can include natural disasters, revenue interruptions, unused bond proceeds, and canceled projects. Investors should carefully read the offering memorandum to understand all situations that can trigger a special redemption and the risks associated with it.

Liquidity Risk: Investors' ability to sell the bond before maturity and the various factors that affect the price they will receive are known as liquidity risk. Two key variables are the issuer's credit rating and general interest rate fluctuations. The original issue size can also impact liquidity, and the bond may have features or characteristics that are not attractive to buyers in the current market. Bonds are generally more liquid in the initial period after issuance, which is when trading volumes are usually highest.

Interest Rate Risk: Interest rate changes almost always affect bond prices. When interest rates rise, the price of existing bonds generally falls. If you sell the bond in such an interest rate environment, you may receive less than what you paid. The volatility due to interest rate risk is generally higher for long-term bonds and decreases as maturity approaches.

Call Provision: Bonds may have a call feature that allows or requires the issuer to redeem the bond at a predetermined price and date before maturity. Callable bonds usually offer higher yields to compensate investors for the risk of having to reinvest the proceeds at a lower rate. Bonds are often called after issuance if interest rates decline. Before buying a bond, check if it has a call feature and consider both the call yield and yield to maturity.

Special Redemption Provisions: Investors should also be aware of any special redemption provisions that give the issuer the right to call the bond due to one-time events, as specified in the offering documents. Situations that may trigger a special redemption include natural disasters, discontinuation of revenue sources, failure to use bond proceeds, or project cancellation.

Put Provision: Bonds may have a put feature, which gives investors the option to sell the bond back to the issuer at a specific price and date before maturity. This offers some protection to investors and, therefore, bonds with this feature usually offer lower annual yields.

Reinvestment Risk: In a declining interest rate environment, bondholders face the risk of having to reinvest their interest income and principal repayments at lower rates.

Inflation Risk: In a high or rising inflation environment, the purchasing power of future cash flows (coupons and principal payments) may decrease.

Prepayment Risk: Some types of individual bonds, including mortgage-backed securities, have prepayment risk, similar to call risk. The risk involves the issuer accelerating principal payments, changing the anticipated payment schedule.

Market Risk: This is the risk that the entire bond market declines, affecting the value of individual securities, regardless of their fundamental characteristics.

Selection Risk: This is the risk of choosing securities that perform poorly for unanticipated reasons compared to the market.

Legislative Risk: This is the risk that changes in laws affect the investment value, such as changes in the tax code affecting the value of taxable or tax-exempt interest income.

Concentration Risk: This is the risk of insufficient diversification by holding a concentrated portfolio of bonds issued by a few issuers or sectors.

Foreign Risk: In addition to the risks mentioned above, there are additional considerations for bonds issued by foreign governments and companies. These may experience higher volatility due to increased political, regulatory, market, or economic risks. These are especially pronounced in emerging markets.

Additional Information and Risks Related to Government Bonds
Low Yields: Government bonds generally offer lower interest rates as they are perceived to have lower default risk compared to most other securities.

Additional Information and Risks Related to Brokered Certificates of Deposit (CD)
Macqwerty offers new issue CDs without separate transaction fees. Compensation is received as part of the selling group or as an acquirer participating in the offer.

Early Sale Before Maturity: Brokered CDs sold before maturity are subject to price markdowns, and significant profits or losses may occur due to interest rate changes. The market value of the CD in the secondary market can differ from the purchase price and may fluctuate based on changes in interest rates and other factors. The secondary market for CDs is generally illiquid.

Low Yields: Due to the inherent safety and short-term nature of CD investments, CD yields tend to be lower than the yields on riskier investments.

Step-Up CDs: If your Certificate of Deposit (CD) has a step-up coupon system, the CD interest rate may be higher or lower than the general market rate. Typically, step-up CDs pay a lower interest rate than the market for an initially defined period (usually 1 year). After the initial period expires, the coupon rate generally increases, and the CD pays this rate until the next step, which then changes again and continues until maturity. The holder bears the risk that the step-up coupon rate may be lower than future market rates. Step-up CDs typically include a call provision, so the holder also assumes the risks associated with callable bonds. It is important to understand that if the CD is called, you will not benefit from the interest payments of subsequent steps. The initial interest rate on a step-up CD is not the yield to maturity (YTM). You can only receive the YTM if you hold the CD to maturity (i.e., if you neither sell the CD nor call it). Please check the step-up schedule and call information that can be verified in the coupon and attributes section of the search results page or in the CD offering document.

Note: Financial terms and conditions should be understood carefully and it's best to consult with a financial advisor for personalized advice.

Tax Status: Interest earned from many municipal bonds is typically exempt from federal income tax, and in some cases, state and local taxes may also be exempt for investors who own bonds issued within their jurisdiction. As a result, the stated interest rate may be lower than that of fully taxable bonds, but when considering taxes, they may provide greater returns. Investors should remember that municipal bonds are not entirely free from all tax implications. Federal and/or state alternative minimum tax may apply to interest income.

Additionally, some of the tax-exempt interest obligations earned by corporations may be included in the calculation of adjusted current income for corporate federal alternative minimum tax purposes. Federal branch profits tax or federal tax on excess net passive income of certain S corporations may also apply to interest income, particularly for specific foreign corporations doing business in the United States.

Please note: Tax laws and their implications can be complex. It's best to consult with a tax advisor for personalized advice.

Investors choosing between taxable and tax-exempt bonds should consider not only their income tax bracket but also the varying profit potential between taxable and tax-exempt bonds.

Bond Insurance: The creditworthiness of municipal bonds can be enhanced through bond insurance provided by professional insurance companies. These companies charge a fee and guarantee timely payment of principal and interest, depending on their ability to pay out claims. In some cases, insured bonds may receive the same credit rating as the insurance company, based on the insurer's capital and ability to repay liabilities. For insured municipal bonds, it is good to assess the ratings of not only the issuer but also the insurance company to evaluate the bond's credit risk profile more accurately. The rating of the issuer is sometimes referred to as the 'underlying rating.' In recent years, the ability of many bond insurers to pay claims has significantly weakened.

Refusal Risk: This is the risk that the issuing state or local government refuses to pay the bond. If the state or municipality deems a partial or full refusal reasonable and necessary to achieve other significant public purposes, there is no guarantee that a validly issued bond will not be refused.

Additional Information and Risks related to Corporate Bonds:
High-yield (below investment grade) corporate bonds carry higher risks than investment-grade corporate bonds.

Event Risk: This is the risk of unexpected events negatively affecting the issuer. Examples include natural or industrial disasters, acquisitions, and corporate restructuring.

Equity Correlation Risk: High-yield bonds may have higher yields because there is greater uncertainty about the company's ability to generate sufficient cash flow through operations. Investors in high-yield bonds may see bond values decline in tandem with economic or stock market downturns.

Step-up Coupons: If your corporate bond has a step-up coupon schedule, the interest rate on the corporate bond can be higher or lower than regular market rates. Typically, step-up corporate bonds pay lower interest rates for an initially defined period (usually one year). After this initial period expires, the face interest rate generally increases. The bond will pay this increased interest rate until the next step, at which point the rate changes again and continues until maturity. Holders bear the risk that the stepped coupon interest rate may be lower than future market rates. Step-up corporate bonds usually include call provisions, so holders also assume the risks associated with callable bonds. It's important to understand that if the corporate note is called, you won't benefit from the interest payments in the subsequent steps. The initial interest rate of the step-up corporate bond is not the yield to maturity (YTM). You will only receive the YTM if you hold the corporate bond until maturity (i.e., you don't sell or have the bond called). Check the coupon and property columns in the search results page or the legal investment documents for step-up schedules and call information.

Taxes: Structured products may be considered contingent payment debt instruments for federal income tax purposes. This generally means that even if you do not receive cash payments until maturity, you must pay income tax annually on the accrued income. Also, profits realized from the sale of such products could be treated as ordinary income. Refer to the offering documents for specific tax treatment and consult a tax expert for more details.

Fees and Charges: Placement fees and other costs vary and could affect the secondary market price of structured products. Investors should consider these costs and other fees included in the offering document before investing.

Other Risks:
Quantifying all risks in the bond prospectus, circular, or official statement is not possible. Lawsuits or significant legal changes, abnormal weather conditions, economic downturns, or other unforeseen events can impact the issuer's ability to fulfill financial obligations.

System availability and response time may vary depending on market conditions.

Providing recommendations or equivalent results does not imply endorsement by Macqwerty.

Prices and yields are posted before considering mark-ups (buying) or mark-downs (selling). Price increases/decreases are applied for customer review prior to orders.

Bonds are offered through our company, affiliates, or various third-party providers and generally act as risk-free entities.

Our company or affiliates, or potentially intermediating brokers, may independently increase or decrease the prices of securities and may realize trading profits or losses.

All bond purchase orders are routed through Macqwerty. Upon your bond order being routed, Macqwerty can fulfill the purchase orders for secondary corporate and institutional bonds at par value. If Macqwerty chooses to execute your order rather than routing it to another market, it is because we believe your order will receive price improvement in the secondary market. Price improvement is defined by Macqwerty as a purchase order executed at a price lower than the selling price displayed on Macqwerty. Review of orders by Macqwerty does not guarantee execution or price improvement. Products may be routed to Macqwerty product writers. Such products may not be available at the given time.


The text appears to describe a set of procedures and considerations for handling customer accounts, trading units, and financial instruments through a system referred to as "Macqwerty." Here is the English translation:

Customer Account Value Trade Unit Count
IFA-K 201403 -125.0 $100,000 4
IFA-K 201404 -125.0 $75,000 3
IFA-K 201405 -125.0 $150,000 6
IFA-K 201406 -125.0 $50,000 2
IFA-K 201407 -125.0 $25,000 1
IFA-K 201408 -125.0 $25,000 1
IFA-K 201409 -125.0 $75,000 3

In summary, the allocation process involves the following steps:

Each account is identified by the number of trading units or lots it holds.
A serial number is assigned to each trading unit or lot. (e.g., IFA-K 201406 -000000 will have six numbers assigned.)
A random number is generated to determine the first unit or lot for the selection process.
After that, the trading units or lots participating in the allocation are based on incremental random numbers until the count allocated to Macqwerty is exhausted.
The allocation of callable securities is not done on a proportional basis. Therefore, a customer may receive either full or partial redemptions, or none at all. Due to the lottery procedure, holders may end up with odd-lot positions in their accounts.

If a partial call is considered beneficial to holders of callable securities, Macqwerty will not allocate to its own or conversion company's proprietary accounts and employee accounts until all other customers have been served.

If a partial call option occurs at a price equal to or higher than the current market price captured in Macqwerty's pricing reporting system, Macqwerty generally classifies the call option as beneficial to the security holders. If a partial call option occurs at a price lower than the current market price, Macqwerty generally classifies it as disadvantageous to the security holders.

Some specific debt securities may have redemption features that are not disclosed in the trade confirmation. The existence of special mandatory redemption features like sinking fund provisions may not be disclosed in the trade confirmation. It is the customer's responsibility to review all publicly available documents and understand the risks of special calls or early redemptions that may impact returns. Issuers may occasionally post offer notifications for redeeming callable securities within limited time, price, and bidding parameters. Macqwerty is not obligated to notify customers of such posted calls.