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Introduction to Bonds and Fixed Income

  • Banking and Financial Markets, Bonds & Fixed Income Markets, Derivatives, Risk and Credit
  • Duration: Two days
  • Information

    A two-day course for banking personnel requiring a working knowledge of fixed income markets. The development of bond markets is examined, from early government fund raising through to the sophisticated products in use today.

    We look at the range of products along with the roles and motivations of issuers, investors and intermediaries. How yields are calculated and the way bond prices move. There is a focus on the issuing process, together with overviews of yield curve analysis, repo markets and the securitisation process.

    We finish with an analysis of what happened in the Global Credit Crunch, and the lessons that have been learned.

    Teaching methodology will feature case studies and exercises


    Day One


    Bond Basics

    •   Background and development of the market
    •   Definition and key features- what is a bond?
    •   Domestic and International markets
    •   Motivations of the major players
    •   International Financial Institutions: EIB, EBRD

    Focus on the roles of the Issuer, Investor and Intermediary

    Money Markets Instruments
    Definition and key features of:


    •   LIBOR vs Base Rate
    •   T.Bills, CD’s, Acceptances, CP, Money Market Funds


    Bond Structures

    •   Typical bond structures - fixed and floating rate bonds
    •   Structured Securities
    •   Zeros, Hybrids and Convertibles
    •   Day count conventions: A/360, A/365, 30/360

    Bond Pricing


    •   Reviewing interest rate mathematics
    •   PV, FV, Discount rates,
    •   Par, Premium and Discount pricing concepts
    •   Clean and Dirty prices - Accrued Interest
    •   The Price/Yield Relationship


    Bond Yield

    •   First principles of valuation
    •   Value of a bond is equivalent to the sum of all its cash flows, NPV’d
    •   Current Yield, Income Yield
    •   Yield to Maturity (YTM)
    •   Gross Redemption Yield (GRY)

    High Yield Structures

    •   Credit Ratings and the Ratings Agencies
    •   Junk Bonds/High Yield Debt
    •   Credit Ratings- Advantages/Disadvantages
    •   Corporate Bond spreads
    •   Emerging Market Securities

    Day Two

    Macroeconomics and Yield Curves

    •   The term Structure of Interest Rates
    •   Benchmark Yield Curves
    •   Models of the Yield Curve:
    •   Positive/Negative/Flat/Inverse/Segmented
    •   Rationale for shapes
    •   The Sterling yield curve

    Examples and applications for issuers and investors

    Fixed Income Risk Management

    •  Bond Risk analysis
      •  Macauley duration
      •  Modified Duration
      •  Convexity
      •  Basis Point Value (BPV)
    •  Portfolio Strategies – Passive/Active
    •  Interest rate anticipation
    •  Yield curve plays
    •  Sector Rotation

    Issuing Bonds – The Primary Market

    •   Public Issue vs Private Placement
    •   Origination
    •   Appointing a Lead Manager
    •   Structuring and Pricing
    •   Underwriting Syndicate
    •   “Gray Market” trading
    •   Bought deals/Fixed Price Re-offer
    •   Secondary market trading


      Background and development

    •   Repo/Reverse Repo
    •   Bilateral and Tri-Party Repo
    •   Repo concepts “Specials” and “Haircuts”
    •   Collateralised money market instruments
    •   Benefits to the Investor and bond holder


    •   Securitisation Structures, SPV’s
    •   Transaction Types: Mortgages, Future Receivables, Municipal income streams, Tax Revenues
    •   Asset Backed Structures: CDO’s, CMO’s
    •   Conventional and Synthetic Structures

    The Credit Crunch

    •   The business landscape
    •   What happened and why
    •   Who was to blame, the banks, the investors, the regulators or governments
    •   Lessons for the future

    Applications and Examples

    Course Conclusion

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    As every course we run is tailored to meet the specific needs of each client, we can only provide an estimate after fully understanding your specific requirements. Please complete the form below of call +44 (0) 208 894 4977 to discuss how Taylor Associates can help you.

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