1.5: Banking and the bond market

Debt used to be a number that went up. Now it has a counterparty. The bond market holds its own cash, quotes what it will pay you and what it charges, and both move when it runs short or stops trusting the issuer. A new issue raises what the market will actually buy and sells the rest over the following turns, so a government the market has soured on feels it immediately.

Twelve new funds hold bonds rather than shares, for coupon income or for a bet on a shaky government paying up. Equity markets got the same treatment underneath: real depth, and redemptions priced when they are paid rather than when they are asked for.

The banking rebuild runs under all of it. Every charter's loans advance under one rulebook, every flow through a bank settles exactly once against a journal you can audit, and savings accounts have a full lifecycle including the part where a bank fails.

Also in 1.5

The bond market now has real buyers and sellers

What changed

• •Selling a bond has a limit. The market pays for what you sell from its own cash. If it cannot take the whole order it tells you how many units it can buy right now; interest income refills it every turn.
• •Buying a bond funds the market. The money you pay goes to the bond market for that currency instead of disappearing.
• •Unsold bonds earn for the market. Coupons and repayments on bonds the market holds are paid to it, so it grows with the debt it carries.
• •Central bank operations use the same market. Bond purchases put deposits into it; bond sales draw from it and stop when it runs short.
• •Winding up a company sells its bonds at market price. The estate gets what the market will pay, not face value.
• •No debt, no bonds. A government that has paid off its debt no longer reissues bonds as old ones mature.

Bonds now trade at a bid and an ask

What changed

• •Two prices, not one. Selling settles at the market's bid, buying at its ask. The gap is the dealer's cut: one percent each way on government paper, two on corporate.
• •A wary market pays less. When the market is short of cash, or a government's debt looks shaky, both prices slide down. Strong issuers earn a small premium.
• •You can see the depth. The bond page shows the bid, the ask, and how many units the market can buy at once. The trade window caps a sale at that number and tells you why.
• •The market grows with the economy. Each currency's bond market sizes itself to broad money, takes in savings when it runs low, and returns cash when it has more than it needs.

Bonds have to find buyers

What changed

• •You are funded for what sells. When you issue a bond the market buys what it can afford and trusts. You get that money now; the unsold part keeps placing turn by turn and pays in as it goes. The confirmation tells you the share the market took up front.
• •Weaker credits sell less up front. A top-rated company can place its whole issue; a distressed one places a fraction and waits.
• •Governments face a real auction. Each quarter's bond sale fills only as far as the market has cash and appetite. A poor fill counts toward a sovereign debt crisis.
• •Central banks respond. An automated central bank buys a bounded slice of an unsold government issue. A player-run one is notified and decides for itself.
• •The bond page shows units still placing.

Bond funds

What changed

• •Government bond funds. Each of the eight fund countries has a fund that holds its own government's bonds.
• •Four global bond funds. Investment grade sovereign, emerging markets sovereign, investment grade corporate, and high yield corporate. The emerging markets and high yield funds hold the riskier paper and pay for it in yield.
• •They trade with the bond market. Bond funds buy from the market at its ask and sell to it at its bid when holders redeem. Coupons build the fund's value turn by turn.
• •Every fund can raise cash from bonds. A fund that owes redemptions and has too little cash sells shares first, then bonds.

Bond market keeps a reserve for auctions

What changed

• •Auctions come first. The bond market keeps half its target balance back for the next government auction and places leftover paper only from the cash above that.

Bills stay in their own country

What changed

• •Your bill, your country. A law that moved an economic metric was applying that change to every region in the world. It now applies only to the country that passed it.
• •One growth number. The budget page showed national GDP growth from the end of the last fiscal year while the economy pages showed this turn's. Both now show the live figure.
• •Smaller countries' growth is measured, not assumed. Countries without a national summary were recording a fixed growth rate. Their exchange rates and stability now respond to what their regions are actually doing.

Honest corporate numbers

What changed

• •The margin you see is the margin you keep. The financials and CEO tabs now show net margin over every cost, upkeep included. A plant that was reading 30 percent while losing money now reads negative.
• •Fund units count. Buying into an index fund no longer drops you down the wealth list. Units are valued at the fund's quoted NAV.
• •No more one-company funds. An index fund caps any single name at a fifth of the fund and spreads the rest.
• •Profit cannot exceed revenue. Policy credits are capped at the costs they offset. The public API now reports the same profit as the corporation page.