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Fundamentals of Bonds and Fixed Income Markets

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

    This Two – Day Programme will be highly interactive and based on case-study work. It will be illustrated by real-life examples.


    This workshop is designed to provide a fast-track introduction to fixed income products, issuance and investment principles.
    At the end of the programme, all delegates should be able to:

    • Describe the features and characteristics of fixed income securities
    • Understand the role of fixed income securities in capital raising
    • Identify the main players in each market
    • Describe the various fixed income instruments and the different markets
    • Explain the risks of fixed income issuance and investing
    • Perform bond maths: present and future value, discount factors and the different yield calculations
    • Explain the effects of political and economic changes on fixed income markets, the impact of interest rate sensitivity, and credit risk concerns

    The course’s primary focus is on government and corporate bonds, but other fixed income securities such as money market instruments, municipal bonds, mortgaged-backed securities, and asset-backed securities are also discussed.
    Clients who would benefit from attending this course would be:

    • Traders
    • Salespeople
    • Analysts
    • risk managers
    • auditors
    • treasurers
    • fund managers
    • finance directors
    • corporate finance managers
    • portfolio managers
    • other functions working in the global bond markets

    Participants will have little or no prior knowledge of Fundamentals of Bond Products


    Day One

    Session 1:

    Introduction to bonds and bond markets

    Define the characteristics of the major bond markets

    Analyse differences between the markets

    Recognise who issues / invests in different types of bonds and why

    • What is a bond?

    • Fixed rate bonds and floating rate notes

    • Bond issuers

    • Bond investors and their requirements

    • Exercise: Identify types of bond issuers and investors

    Session 2:

    Bond yield measures

    Calculate bond prices and yields

    Recognise the limitations of yield to maturity

    Describe the relationship between bond prices and interest rates

    • Bond terminology

    • Exercises: Bond price, yield and accrued interest calculations

    • Yield to maturity

    • Yield to call / worst / put

    • Total return

    • Calculating accrued interest

    • Pricing a floating rate note

    • Clean and dirty prices

    • Current yield

    • Trade date and settlement date

    • Quotation conventions

    Session 3:

    Introduction to bond risk management

    Compare various measures of interest rate risk

    • Types of risk found in a bond issue

    • Macaulay duration

    • Applications of duration

    • Fixed income fund management

    • Immunisation

    • Modified duration

    • Price value of a basis point

    • Convexity

    • Portfolio duration and convexity

    • Case study: How fixed income funds use duration

    • Exercise: Calculating the hedge ratio

    Session 4:

    Macroeconomics and yield curves

    Demonstrate how expectations theory explains the shape of the yield curve

    Analyse different yield curve shapes

    Explain how yield curves moves can be interpreted by the market

    • Types of yield curve

    • Explanations for the shape of the yield curve

    • The impact of macro-economic factors on the yield curve

    • Case study: Price movements and changes in the curve

    Session 5:

    Credit ratings and credit spreads

    Discuss the role played by ratings in the bond markets

    Define the ratings categories

    Explain the impact of upgrades and downgrades

    Explain the links between credit ratings and credit spreads

    • Secured and unsecured bonds

    • Senior and subordinated status

    • The role of ratings

    • Rating agencies

    • The indenture

    • Credit spreads and relative value

    • Case study: Bond structure and seniority

    • Case study: Estimating a borrower’s rating

    Day Two

    Session 1:

    An introduction to interest rate swaps, currency swaps and credit default swaps

    • Understand the basic definitions and jargon

    • Interest rate swaps

    • Cross-currency swaps

    • Basis swaps

    • Credit default swaps

    • Case studies: Basic applications of derivatives

    Session 2:

    Primary bond issuance

    • Understand how new issues are brought to the market

    • Explain how to price a new issue

    • Government bond auctions

    • The non-government bond new issue process

    • The responsibilities of the lead manager

    • Pricing a new bond issue

    • Syndication

    • MTN issuance procedure: rationale and applications

    • Private placement procedure: rationale and applications

    • Exercise: Pricing a new issue

    Session 3:

    Callable bonds

    Understand the structure of callable bonds

    Identify the inputs to option pricing

    • Pricing a callable bond

    • Inputs into option pricing (non-mathematical)

    • The use of swaptions in connection with callable bonds

    • Exercise: Hedging a callable bond with swaptions

    Session 4:

    An overview of other fixed income instruments

    Describe the structure of ABS, CDOs and covered bonds

    • Asset backed securities (ABS)

    • Collateralised debt obligations (CDOs)

    • Covered bonds

    • Case study: Structure of an ABS deal

    • Exercise: Comparison of ABS, CDOs and covered bonds

    Session 5:

    Fixed income repo markets

    Describe the fundamentals of repos

    Apply repos in the bond markets

    • Repos v. buy/sell back

    • General collateral and special collateral

    • Basic repo maths

    • Applications of repos in the bond markets

    • Case studies: Price and interest calculations

    Course Close

    Register interest

    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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