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Questions tagged [fixed-income]

Securities which obligate the borrower/issuer to make payments on a fixed schedule. Fixed income securities include sovereign, corporate and municipal bonds, corporate loans, and securitized lending (e.g., ABS). "Fixed" refers only to the schedule of obligatory payments, not the amount, and may include inflation linked bonds, variable-interest rate notes, and the like.

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33 views

Recreating / Extending Bond Time Series

I am trying to analyse historical yield curve dynamics within an across countries and step one is extending / recreating historical yields and/or prices. The challenge is this: lets say a 10 year ...
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100 views

Fixed Income Trading Intuition

Is there any literature discussing the economics of trading fixed income securities? I was asked in an interview the other day how I would trade/construct a bond portfolio if a) the fed raised rates ...
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30 views

Emerging market debt local vs hard

In an environment where the dollar is appreciating in value, similar to the current environment. Is it better to invest in emerging market debt local currencies or emerging market debt hard currency (...
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1answer
40 views

Reduction in banks excess reserves link to liquidity and funding

I fail to understand how the reduction in bank excess reserves due to the Fed slowly reducing its balance sheet is linked to a squeeze to liquidity and funding. The Treasury will have to raise ...
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2answers
114 views

Bond Convexity and Maturity

What the reasoning for why bond convexity increases with maturity. Heuristic explanations are somewhat better as I would like a fundamental understanding. Also what causes a more convex bond to be ...
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1answer
72 views

Would you consider yield a stationary or non-stationary process?

Doing some yield curve forecasting and unsure whether should be working with yield or change of yield.
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4answers
910 views

How to download bloomberg intraday data efficiently with API

so I would download a bunch of intraday data, for a bunch of securities, but we keep hitting our monthly cap limit. We don't want to upgrade to a more expensive package as this is simply a research ...
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77 views

Predicting bond auction result. Should I train separate models for different maturity in face of Data deficiency?

Problem Statement Trying to predict how bond auction result ( in terms of yield ) is different from its forecast (the when-issued yield ). More info:http://www.mortgagenewsdaily.com/mortgage_rates/...
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56 views

Wider swap spreads, lower cost of funding?

Can someone help explain this? Wider swap spreads means its more expensive to pay fixed on a swap and and more beneficial to receive fixed on a swap. So if I am borrowing fixed rate and need to ...
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53 views

Cashflows of Inflation linked bond

could somebody tell me how could I use the given current bond price =120 to solve this question. No information about the bond inception date is given, I wonder how could we calculate the cashflows? ...
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2answers
569 views

How is 1y5y - 1y2y Treasury steepener trade executed?

This is a 1-year forward, 2y - 5y steepener trade. How is this executed? Are actual Treasury bonds involved or are these just forward contracts between two parties? Is the trade expressing the fact ...
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1answer
82 views

CDS Spread sensitivity

I am computing HVaR for corporate bonds using CDS spread to approach credit risk. I have data on cds spread for different maturities along the bond life and I need the sensitivity to spread change for ...
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0answers
62 views

Should we use total return or OAS when comparing different bonds?

When comparing different bonds, for example corporate bonds and Treasuries, should we use total return or Option Adjusted Spread if we want to know one's return advantage over another? Some say ...
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107 views

How to calculate bond equivalent Yield of treasury strips using Quantlib?

I'm trying to calculate the bond equivalent yield of a zero coupon treasury strip with a quoted yield of 2.4162%. I've tried the following code and get 2.4424% but Bloomberg is reporting a Treasury ...
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1answer
67 views

Bond asset class long term assumptions [closed]

How are long term capital market expectations set in the industry? I'm looking to get some pointers about setting long term assumptions for fixed income asset classes like global high yield credit, ...
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0answers
179 views

Calculating price -> yield and yield -> price for fixed rate bonds using QLNet

I'm trying to implement a simple calculation module to calculate fixed rate bond yield given the price (and then price based on yield to verify the calculation). I've looked at a number of examples (...
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1answer
697 views

DV01 approximation

I often approximate DV01 using: DV01 = Market value of position * 1bps * Duration in years. Here, for Bond or CDS, I generally assume duration = residual maturity. My query: Assume I buy a bond. So ...
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61 views

When the Fed is in a hiking cycle or tightening cycle, the forwards are

Forwards are flatter in a hiking cycle because market is pricing in expectations of the Fed raising rates. Steeper trades would be carry positive correct? Forwards are steeper in a hiking cycle ...
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4answers
505 views

Term premium 10 year yields

There's a lot of headlines about term premium. If I understand this correctly, term premium compensates investors for holding a longer maturity bond vs rolling over short-term bonds. So as an example,...
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2answers
776 views

Different ways to express a 2s10s steepener?

Some off the top of my head 2s10s cash steepener, however this ages into a 1s9s over time 2s10s swap steepener, better/cleaner way? Are there other ways to express this curve strategy? Would you do ...
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1answer
144 views

Convertible Bond in Foreign Currency - Quanto Adjustment

I need to value the following convertible bond: The bond notional and interest is denoted in USD, but is convertible into Euro denominated equity. Normally, I would value such a bond with a ...
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1answer
668 views

High convexity vs low convexity bond definition

Isn't high convexity always better than low convexity bond from the formula that $$\frac {ΔB} B=-D \frac {Δy} {1+y} + \frac 1 2 CΔy^2$$ Since $\frac 1 2 CΔy^2$ is positive no matter what so the price ...
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55 views

Portfolio Duration Immunization Strategy Intuition

It makes sense if we think of portfolio duration with duration, say 6, as a 6 year zero bond which you will receive the amount at maturity no matter the interest rate change. But if we define duration ...
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1answer
733 views

Generic bond yields

I was looking on historical sovereign bond yields for a project. I was wondering what is meant by "generic bond yields" mentioned on bloomberg. Somewhere else i found data about the same country but ...
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1answer
81 views

If March contract and June contract has the same CTD, how is it a repo trade?

If the March bond future and the June bond future have the same CTD [cheapest to deliver bond] I am a little unclear on why people say that the calendar spread (long June short March) is a repo trade. ...
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383 views

FX implied yield logic

If I buy a bond at 10% yield in currency X and want to hedge it and the implied FX yield is 12% for some reason, does this mean that I will lose 2% (10 - 12%) I know FX implied yields are the yields ...
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23 views

Implied coupon given yield to maturity

Let's say I have a newly underwritten bond with an offering price of 107.1523, an offering yield to maturity of 4.1, a coupon of 5 and a call date of 2023-12-01. A few days after the bond hits the ...
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69 views

Any books on rates vol? Recommendations

I am looking for book on rates vol. Are there any good literature out there that provides a discussion with practical applications?
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1answer
219 views

How do swap dealers make money from trading cancellable swap?

A fixed-rate payer (e.g. a swap dealer) of a cancellable swap pays more interest than he receives because he has the right to terminate the swap after a certain time if rates fall. What are the ...
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1answer
55 views

What are the reasons that make stock return - bond yield correlation a meaningful one?

I have come across interesting charts that show the changing correlation between stock returns and government bond yields. My gut instinct tells me that such relationship would be expected to be ...
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1answer
68 views

Is the forward curve always used as benchmark for evaluating trade ideas?

Every time traders talk about a specific trade, they always evaluate it against the forward curve. For example, 2s5s is trading at XXX, The 5 year bond is trading at YYY. The forwards are trading at ...
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4answers
272 views

Treasury futures basis & calendar spd [multiple questions]

How do I determine if a bond will become CTD in a futures contract and how likely there a CTD switch is? Also, how do you use implied repo/actual repo to assess richness/cheapness of two calendar ...
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0answers
221 views

What is the forward price of a bond 18 months from today?

What is the formula to compute the forward price of a bond 18 months from now? I have the following data: ...
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2answers
685 views

Simulating a path of bond yields by Monte Carlo (Python)

I have a number of given time series for bond yields (given in a dataframe in pandas package in Python). I need to do the following task in Python: "1. Simulate 1000 path 30 steps ahead for any yield ...
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2answers
84 views

Basic question re: Fed interest rate tightening and rising interest rates

February 2/8/2018 - context in case the question is still around beyond today: the stock market has been falling for almost a couple of weeks in the midst of fears of overheating of the economy (...
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1answer
131 views

(Self studying) Finding data on Bloomberg

I apologize for asking this very simple question, but I was reading through this chart for the first time, and I would like to know where on Bloomberg can I find data like these, since I have to price ...
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2answers
2k views

Determine the carry of a treasury bond futures contract?

Hi fellow financial market enthusiasts. I'm trying to understand my options as a retail investor. I want to leverage a cash bond portfolio but my broker does not allow that, so I want to use futures ...
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1answer
172 views

Download bond yields R

I need to download bonds yields using R. I tried, as usual, I did for stocks: spc <- new.env() setDefaults(getSymbols,src="FRED") getSymbols("^AT0000386198", env = spc, from = "2010-01-01", to =...
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0answers
97 views

Pricing a structured note instrument

I am trying to work out the following fixed income problem, where I am asked to price a structured note in Excel, which seems to me to be a reverse collar. My purpose was replicating this structured ...
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0answers
53 views

IRR behaviour if Prepayment and Defaulting

Following context, an all-equity financed loan portfolio composed of a number of different loans, with a Weighted average coupon of 14.5%, a monthly repayment rate of 2.7% and a monthly default rate ...
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323 views

Yield to maturity as discount rate

Assume that face value of a bond is equal to 1000. The coupon rate is 3% and yield to maturity is 4%.How can we correlate coupon rate and YTM in order to explain the state of current bond price. (...
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1answer
271 views

Build a swap curve / Swap Hedging

I’m going through the exercise of building a swap curve. I understand I need libor rates for the short-end, futures for the medium-end, and swap rates for the long-end. Should I be using bid, mid, ...
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1answer
106 views

Data on Options on US-Treasury Futes

I am working on an assignment on the Implied Volatility Surface for the options on US-Treasury futures (ZB, ZN, ZF, etc.). I need data on bid and ask, Imp. Vol, Price of underlying etc. Do you know a ...
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1answer
44 views

Calculating a firm's cost of debt using bond issues

When a firm issues coupon bonds that are traded on the open market these bonds can trade at either a premium or discount during the lifetime of the bond. If, for instance, the bond trades at a ...
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1answer
189 views

Need a way to calculate YTM for a bond with a step-up coupon? Thank you!

Would be grateful if someone could guide me on how to calculate a YTM for a step-up coupon.
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1answer
39 views

compute r(t) in Vasiceck model, what is $e^{at}r$

I know how to solve the exercise using the hint. But I do not understand where the hint is coming from. Is it just continous compounding? Can anybody explain $f(t,r) = e^{at}r$? What does it stand ...
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2answers
2k views

Are 3 month t-bill rates in FRED annualized?

Are the 3 month t-bill rates documented by FRED here annualized? For example, the rate for January 1997 is 5.03%. Does that mean one would get a 5.03% return in 3 months, or is that an annualized rate?...
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1answer
109 views

Interest rate risk. Books recommendation

Can anyone suggest me some good books for Interest Rate risk and Credit Spread, credit spread duration? I am new to finance so a book focussed on basics will be more helpful. Thanks
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1answer
68 views

yield concept for a short maturity zero coupon bond

I am trying to clarify what is the more relevant and appropriate quantity for a discount security / zero-coupon bond, that is defined by a face value, FV, a present value, PV and a time to maturity, t,...
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1answer
129 views

duration and modified duration

By modelling duration and modified duration in Excel, I found that modified duration approximates bond price change well when there is a 1% increase in yield, while duration is a good approximation ...