# How to benchmark bonds?

I am trying to find for each european bond in my database a proper Benchmark to compare them with the Bloomberg benchmarks for bonds.

What i have done so far is to extract a list of all government bonds in Europe and calculate a simple linear formula where I compare 4 fields with each goverment bond:

- Coupon
- Maturity Date
- Issue Date
- Volume


the formula used is:

f(bond,govBond) = abs(bondcoupon - govcoupon)*coefCoupon + abs (bondMaturityDate - gov MaturityDate)*coefMaturity + ...
Where the coef are used to give the same weight to each field


So, to find a proper benchmark, I choose the min value returned by this function (i.e the closest gov bond using these criterias).

The results of this approach is approximately a 25% match with Bloomberg list of Benchmark.

Is this a "convenient" way to benchmark bonds? I know that those 4 criterias are not sufficient (Maybe use Yield points from a yield curve or tenor, there are a lot of fields to choose) but I have chosen those 4 fields to simplify the computing (database contains at least 10000 bonds).

• don't know why this was downvoted but seems like a perfectly good question to me. I don't have a good answer for you, but my personal experience was that this was quite difficult. I too tried to algorithmically come up with the benchmarks, but it never worked 100%. In the end, the traders just sent me the list of benchmarks on a daily basis and the list is what I used for analytics purposes... Jul 9, 2014 at 22:07
• Thank you for your comment. I believe also that this will not be as easy as I thought. Although, If i can have at least 50%, that would be great! Jul 10, 2014 at 8:34