Bond Valuation Report: US Bond Market and Qualcomm Company

This report provides a comprehensive analysis of bond valuation, focusing on the US bond market and the Qualcomm Company. It begins with an overview of the US bond market, including the types of bonds available, such as Treasury bonds, municipal bonds, and corporate bonds, and discusses current yield rates. The report then examines the yield curve for US Treasury Securities, interpreting its shape and implications. A significant portion of the report is dedicated to Qualcomm's bond issues, detailing their coupon rates, ratings, and the proportion between fixed and floating rate bonds. Furthermore, it compares Qualcomm's yields with those of its key competitor, Nokia Corporation, explaining the factors that influence yield differences. The analysis incorporates financial data from reputable sources like Bloomberg and Finra, providing a well-rounded understanding of bond valuation and market dynamics.

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Finance
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Table of Contents
Bond Valuation..........................................................................................................................2
References..................................................................................................................................6

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Bond Valuation
a) The US Bond market is the largest bond market in the world which sets out the most
reliable and liquid financial instruments backed up by the US Government. The
maturity of the bond varies in according with the nature and classification of the bond
whose tenure ranges between 1 Years to 30 Years of time. The bond market currently
provides a wide range of offerings from Treasury Bonds which are linked to inflation
protected. The majority of the public debt is financed with the help of the US
Treasury Securities which are sold to individuals and qualified investors. The
outstanding bond issues can be generally classified into sovereign bonds denominated
in US Dollar where the cumulative volume of the bond is around 15.98 trillion1.
Municipal Bonds denominated in USD outstanding bond is around 30.80 billion. The
Corporate Bond issued by the corporates is denominated in various currencies like
USD, EUR, GBP and AUD. The ratings and the risk return of the bond is well stated
and described. The 1 Year Treasury yield for the US Bond market is currently 2.41%.
On the other hand side the yield generated by the Municipal Bond was around 1.53%.
Treasury Inflation Protected Securities on the other hand side has given a yield of
0.46%. The performance of the bond market was compared in contrast to the GDP of
the economy, which was assessed to be increasing in terms of Government Debt to
GDP ratio.
b) The yield curve for US Treasury Securities is seemed to be rising upward where
return generated from the 1-year. However while examining the last close of the yield
generated and performance by the treasury securities it was observed that the 1 month
at 2.40%, 3 month at 2.43% and 6 month yields at 2.46% were found to be increasing.
The Yields for 2 year was at 2.31%, 5 year is at 2.28% treasury yield on the other
1 "United States Rates And Bonds." Bloomberg.com. N.p., 2019. Web. 11 Apr. 2019.

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hand was found to be decreasing making the yield curve fall2. In the contrary side the
long term treasury yield for the 10 year treasury yield was at around 2.48% and the 30
Year Yield was at 2.90%. The rising upward trend in the long term yield curve
implies a positive robust outlook in contrast to the performance of the economy while
the medium terms stays well aligned with the sustainable yield levels.
c) The company taken into consideration for the purpose of the analysis is the
Qualcomm Company where the same were analysed by taking financial data from
Finra3. Two such identical bonds were found as the top 50 Investment grade bond in
the bond market which were as follows:
Top 50 Publicly Traded Investment-Grade Issues by Number of S1 Trades Executed
(excluding convertible bonds, equity CUSIPs and 144As)
Ran
k SYMBOL ISSUER NAME COUPON MATURITY RATING TRADES DEALERS REPORTING
18 QCOM4246677 QUALCOMM INC 3.000 20-05-2022 A 3,549 144
43 QCOM4499065 QUALCOMM INC 2.600 30-01-2023 A 2,848 128
The above identified bonds were the key issue of the Qualcomm company were the
Coupon Rate given by the Bond QCO34246677 was around 3% and the rating of the
bond was A. On the other hand the QCOM4499065 bond provided 2.60% coupon with
“A” rating4.
2 "US Bond Market." C Bonds. N.p., 2019. Web. 11 Apr. 2019.
3 "Bonds Home." Finra-markets.morningstar.com. N.p., 2019. Web. 11 Apr. 2019.
4 "Annual Report 2018." Investor.qualcomm.com. N.p., 2018. Web. 11 Apr. 2019.

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While analysing the financial statement, 10K report of the company where the
proportion between the floating rate and fixed rate bonds for the company was somewhat
equal for the company. The coupon paid by the company on the fixed rate bond was
comparatively higher than that of floating rate bonds. However, it was also found that the
company has maintained a well balance with the varying interest rate levels across
various maturities so that the effective interest rate for the company stays stable.
d) The key competitor of the Qualcomm Company is the Nokia Corporation who have
similarly issued various types of bonds and securities in the form of senior notes and
revolving credit facility. The interest rate paid by the Nokia Corporation was certainly
higher than Qualcomm Company as observed from the interest bearing liability of the
company given in the annual report of the company5. The higher rate can be because
of the associated business risk, country risk, liquidity and credit risk arising from the
issuer and where the operations of the company is based. Thus it is necessary to
5 "Annual Report 2019." Nokia.com. N.p., 2019. Web. 11 Apr. 2019.

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account for various factors and conditions while analysing the financial position of the
company in terms of debt issued.

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References
"Annual Report 2018." Investor.qualcomm.com. N.p., 2018. Web. 11 Apr. 2019.
"Annual Report 2019." Nokia.com. N.p., 2019. Web. 11 Apr. 2019.
"Bonds Home." Finra-markets.morningstar.com. N.p., 2019. Web. 11 Apr. 2019.
"United States Rates And Bonds." Bloomberg.com. N.p., 2019. Web. 11 Apr. 2019.
"US Bond Market." C Bonds. N.p., 2019. Web. 11 Apr. 2019.