Training Courses

Introduction to Fixed Income

Category: Fixed Income

Course level: Introductory

Open

This one-day course is designed to provide a broad-based introduction to fixed income products and investment principles.

Case studies form an integral part of the course, to allow the delegates to consolidate the information and provide the basis for group discussions.

Objectives

BY the end of the course, delegates will have a more complete understanding of:

  • the role of fixed income securities in capital raising
  • the risks of fixed income
  • the different yield calculations
  • the effects of political and economic changes on fixed income markets
  • fixed income trading strategies
  • LDI strategies

Length

1 day

Course Content

Who buys fixed income?

Pension schemes – ALM, diversification, risk reduction
Charities
Retail funds
Private clients

Features of bonds

Redemption methods

Government bonds – the markets
UK, US, Euro zone, Japan, emerging markets
Types of government bonds
    Variable rate
    Index-linked bonds
    Benchmark bonds
    Issue process

Other issuers

World Bank, IMF, ECB, etc.

Corporate bonds

Types of corporate bonds
Debentures, ULS, chameleon bonds, index-linked, zero coupons
MTNs, FRNs
Convertibles and warrants
Corporate risk

Global bonds/Eurobonds

Features of eurobonds
Trading and settlement risks

Credit ratings

Role of the credit rating agencies
Effect of changing ratings on the fixed income markets

Fixed income products

MBSs and ABSs
Securitisation
CDOs
CDSs
Repos

Market drivers

What drives/moves the bond markets?
Macroeconomics: the relevance of economic numbers
New issuance: borrowers and investors

Yields curves

Understanding the shape of the yield curve
Impact of rising and falling yield curves on bond prices
Convergence and divergence
    Government yield curves
    Government vs corporate yield curve
    Trading anticipated shifts for client portfolios
Case study: Bond pricing and moving yield curves

Risks of investing in bonds

Liquidity, contagion, credit changes, etc.

Essential bond market maths

Coupon price relationships
Discount cash flow methodology
    Pricing a bond
Yield to maturity/GRY
Case Study: Calculate the price of a plain vanilla fixed income stock
Case Study: Changing price as YTM moves
 

Interest rate analysis

Sensitivity and duration
Macaulay's duration, modified duration, dollar duration
Basis Point Value (BPV)
How fixed income managers apply duration
Convexity
Immunisation (worked example)
Liability-driven investment (LDI) strategies (worked example)
Case Study: How fixed income retail funds use duration

Managing fixed income portfolios

Income generation
LDI 
High Income
Spread trading
Using duration
Repos
Case study: Fixed income portfolio strategies

Fixed income derivatives


Futures
Case Study: Using futures to hedge a fixed income portfolio
Case Study: Using futures to alter the duration of a fixed income portfolio
Credit Default Swaps explained (CDSs)
Case Study: Using interest rate swaps to manage the duration of an institutional pension scheme (LDI approach)

This course would be suitable for:

  • Client services and call centres
  • Finance and accounting
  • HR and training
  • Investment administration and operations
  • Legal & Compliance
  • New entrants
  • Risk management
  • Sales and marketing

This course would be suitable for these exams:

  • CFA - Level 2
  • IMC
  • SII Diploma - Bond and Fixed Interest Markets
  • SII IAQ - Introduction to Securities & Investments
  • UKSIP - Introduction to Investment