I was checking a few callable perpetuals on Bloomberg and using their Yield calculated it is always shows Workout date to be the first call date for those bonds. I wonder why this is the case and if there an intuition behind it. I compared a few call dates and indeed for a fixed price the first call date seem to have the smallest yield but is there an explanation?

  • $\begingroup$ Does the coupon remain the same after the call date, or is variable (e.g. fixed to float after the first call date)? Does the workout date change if you type in a really low bond price, like 1(%)? $\endgroup$ Jul 15 at 21:07
  • $\begingroup$ @DimitriVulis yes, those are fixed to floaters and the conversion date is the first call date what yields Workout date. I clarified that BBG treats first workoutdate to be the conversion date but I tried to manually price it and it coincides with the first call date indeed at least the levels the market is trading those bonds. $\endgroup$
    – Medan
    Jul 16 at 1:38
  • $\begingroup$ I'm pretty certain (but check with Bloomberg help, F1 F1) that when it looks for yield to worse of any fixed to floating bond (not only perps), Bloomberg still does not admit the possibility that the call won't be exercised when the coupon becomes floating. Look in SRCH for call callable perps that are just fixed coupon (don't switch to float) and are callable "on or after" - you'll probably see yield to worst working correctly. $\endgroup$ Jul 16 at 2:22
  • $\begingroup$ @DimitriVulis: I confirmed with BBG that WorkoutDate=conversion date by definition. But should not Workout Date depend on the level of the price? Why can't the Workout date be somewhere half way of the floating coupons? It should depend on the forwards rates? I wonder why BBG doesn't allow for other dates and not doing this manual comparison of all yields possible to choose the best? Is there something special about fixed to float? $\endgroup$
    – Medan
    Jul 16 at 2:48
  • $\begingroup$ Yes, Bloomberg silently gives possibly wrong results in some use cases, including callable fixed-to-float. If you really want correct results, you program your own analytics. You can extract CSHF cash flows and calculate IRR yourself for different prices and call dates in e.g. Excel - you're likely to see that sometimes, it's better not to exercise on the first call date. By the way, Bloomberg also makes up a "fake" maturity date for perpetuals, like 2165, which sometimes causes problems if you're not careful. $\endgroup$ Jul 16 at 3:06

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