Transcript No Slide Title

University of Hong Kong
Trading Workshop
Class 6
Fixed Income Workshop I
Fixed Income Market Basics
David Lo
REUTERS 3000 XTRA
Agenda
•
Fixed Income Markets Basics,
•
Yield Curve,
•
Bond Pricing,
•
At the end, you would know
•
– Benchmark curves ?
•
– Credit curves ?
•
– Zero curves ?
•
– Bond Analysis & Hedging ?
REUTERS 3000 XTRA
Fixed Income Workflow
Reporting on Multiple
Positions
Portfolio
Market
Overview
Bond Briefing
Bond Basics
Terms and
Conditions
Bond Quotes
Bond Sector
Browser
Special Bonds
Pricing
FRN Analysis
Index Linked
Analysis
World
Benchmark
Pricing Matrix
Daily Reporting
Bond Trade Monitor
Decision Making
Multiple Positions
Bond Overview
Bond Watch
Bond Portfolio
Bond Portfolio Analysis
Convertible
Convertible Analysis
Bond Overview
Market Watch
Trade Ticket
Bond Fundamentals
Issuer
Bond Credit
Fixed Coupon Bond
Pricing
Barbell Switch
Bond Comparison
Bond Chart
User Defined Bonds
Single Position
Bond Analysis
Bond Calc
Asset Swap
Bond Repo
Bond Returns
Corporate Credit
REUTERS 3000 XTRA
Special Cases
Bond Options
Bond Futures
Fixed Income
•
The price of a bond is the present value of its expected cash flows.
•
The price is the amount the investor will pay for the future cash flows; the yield is the
measure of return on those future cash flows.
•
Hence price will change in the opposite direction to the change in the required yield.
•
The Accrued Interest is the portion of the next coupon the seller is entitled to.
-
AI = C x D / Base.
-
C = Coupon Interest, D = # of days accrued, Base = # of days in coupon
period.
REUTERS 3000 XTRA
What news is relevant to FI people?
•
•
• All alerts AA
•
• Debt technical analysis TECH/DBT
•
• US corporate bond reports Debt/News1 for USC/debt news index
•
• Interest rate news INT
•
• Economic indicators ECI
•
• New issues ISU
•
• 4Cast research and commentary (3rd party) FCT
•
• Government policy changes CEN
•
• Debt news D
•
• World bonds briefing G7/
•
• Market news service (economic data releases) MNSI
•
• Economic forecasts POLL-T
•
• Global top business news TOP/BIZ
•
• New issue commentary IIIA
REUTERS 3000 XTRA
How to search a Hutchison Bond?
REUTERS 3000 XTRA
Bond Analysis Model
REUTERS 3000 XTRA
Bond Analysis Model
•
The Bond Analysis model applies in-depth price and yield analysis for single bonds against benchmarks or other
selected bonds and swap curves. It includes returns, hedging and sensitivity in real time, together with future cashflows
and profit & loss, sensitivity analysis and hedging scenarios. It is integrated with displays of relevant terms and
conditions and includes benchmark analysis and proceeds calculations.
•
Features
•
Simple total returns
•
Hedging, sensitivity and returns analysis
•
Simple and easy bond hedging via notional bond futures
•
Single bond analytics packaged into one model
•
Spreads against any benchmark or other bonds and also against swap curves
•
Benefits
•
Have confidence about in your analysis with the flexibility to adjust all assumptions or change input and derived values
•
Obtain the Yield to Maturity of a bond from a price quote, spread to benchmark or swap rate
•
Obtain the Price from the YTM quote, spread to benchmark or swap rate
•
Calculate the Spread to Closest Swap, interpolated swap, benchmark and JP Morgan Corporate curve* *Not available
for all currencies
•
Obtain Forward Pricing of the bond
•
Calculate the Asset Swap Spread from the Reuters Zero Curve or your own Zero Curve and link to the Asset Swap
model for further evaluation
•
Calculate the Hedge Ratio of position to a futures contract of your choice and view futures quotes, volumes, open
interest and cheapest to deliver bond details if appropriate
•
Graph Term Structures
REUTERS 3000 XTRA
Yield Curves
•
A yield curve is a representation of the term structure of yields for a given market i.e.
For a set of bonds (or other instruement) with different maturities but similar
characteristics.
•
Yield curve are used for a number of reasons:
•
-
Assisting pricing of new issues
-
Assess relative values of bonds
-
Derive implied forward rates
Yield Curves Model
REUTERS 3000 XTRA
Yield Curve Model
REUTERS 3000 XTRA
Historical Yield Curves Comparison
REUTERS 3000 XTRA
World Benchmark Model
REUTERS 3000 XTRA
•
Features and benefits
•
The World Benchmarks worksheet is intended to retrieve all fixed income benchmarks
for a specified country. It allows you to compare real-time curves and to monitor singleselected instruments.
•
With this worksheet you can :
•
Quickly locate any benchmark in the world.
•
Easily find the most yielding triple-A rated benchmarks.
•
Select benchmarks for a single country.
•
Define seven benchmarks and compare their spreads and their returns.
•
Monitor three yield curves in real-time.
•
The World Benchmarks worksheet gives you :
•
A list of all the countries issuing benchmark securities.
•
The easiest possible way to find the most liquid bonds in the world.
•
The latest relevant news in real-time.
REUTERS 3000 XTRA
Multiple Bond Analysis
•
Bond Comparisons
•
Barbell Switch
REUTERS 3000 XTRA
Q&A
[email protected]
REUTERS 3000 XTRA