Introduction to Bonds and Fixed Income
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
Schedule
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
Exercises
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
Repos
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
- 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
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.