The bond information table contains general information about each issue.
Information about current bond yields. This information attempts to
facilitate how the bond is priced compared to the current market yield
curve by extrapolation. LY Premium1, for example, is
calculated by comparing the yield on the bond with the yield returned by
plugging the bond’s maturity into the market yield curve entered in the
yield curve table.
Desired portfolio percentage for various timeframes. The time brackets (tenors) are user customizable.
Desired portfolio percentage for each bond type.
Desired portfolio percentage for each credit tier2:
The bonds.port.calculations.f function possesses an
extremely comprehensive and dynamic algorithm to assist its user in
fixed income portfolio management. The function produces a wide
selection of outputs and provides information on both the individual
bonds in the portfolio, and the overall portfolio. The function allows
users to perform sensitivity analysis on the portfolio by adding and
taking away bonds from the portfolio to analyze the overall effect. The
function is dynamic and allows the option to input more variables above
what is required to further enhance the analysis generated with just the
required inputs. The function will also automatically adjust its output
matrix to any changes made, whether it be by adding more bonds to the
portfolio or adding an optional input.
This section contains the purchase information for the issue.
This section contains several computed columns that contain information about the various financial properties of the bond and the portfolio. There is some magic in the computation of the “Fair YTM”. This column attempts to indicate how the bond is priced compared to the current market yield curve by extrapolation. We need the current market yield curve data for this field to be meaningful.
This section contains a few risk analytics that show modified duration, bond risk, and bond sensitivity. Together, these metrics can be used to gauge the portfolio’s sensitivity to changes in interest rates. In particular, the bond risk field attempts to estimate the change in market value in each bond and the portfolio overall that would likely result from a \(100\) basis point (\(1\%\)) change in interest rates.
Interest rate sensitivity (bond risk) is determined by \(dP=(MDuration)\times(dy)-0.5\times convexity \times (dy)^2\). This takes into account the overstatement of sensitivity in modified duration (straight line estimate of relationship) by removing the excess in duration that is caused by the convexity of a best fit parabola fitted to the bond’s yield curve.
Finally, the Modified Duration and
Bond Sensitivity fields are used to give an indication of
what might happen to the value of each holding and the portfolio overall
as interest rates change.
This table shows the monthly and quarterly cash flows that the portfolio will provide. After tax cash flows from each bond are reduced based on the tax rate that applies to the bond’s type. Tax rates are taken from the types table.
This table displays the amount of the portfolio that’s in each type of Bond and also shows the current portfolio yield by bond type. Average yield, duration, and credit quality per bond type are also displayed.
Breaks down portfolio value by credit quality and shows yields for each credit tier. Cumulative percent in the percent of the portfolio that has a credit rating as good or better than the rating for the given row.
This table displays the amount of the portfolio that will be maturing in various timeframes. Also, for all the bonds maturing within a given time bracket, average yield and credit quality are computed.
The yield premium that this bond offers compared to similar maturity bond based on market yield curve↩︎
| index | moody | sp | tier | description |
|---|---|---|---|---|
| 1 | FDIC | FDIC | 1 | FDIC Insured Issue |
| 2 | Aaa | AAA | 1 | Prime. Maximum Safety |
| 3 | Aa1 | AA+ | 2 | High Grade. High Quality |
| 4 | Aa2 | AA | 2 | High Grade. High Quality |
| 5 | Aa3 | AA- | 2 | High Grade. High Quality |
| 6 | A1 | A+ | 3 | Upper Medium Grade |
| 7 | A2 | A | 3 | Upper Medium Grade |
| 8 | A3 | A- | 3 | Upper Medium Grade |
| 9 | Baa1 | BBB+ | 4 | Lower Medium Grade |
| 10 | Baa2 | BBB | 4 | Lower Medium Grade |
| 11 | Baa3 | BBB- | 4 | Lower Medium Grade |
| 12 | Ba1 | BB+ | 5 | Non Investment Grade |
| 13 | Ba2 | BB | 5 | Speculative |
| 14 | Ba3 | BB- | 5 | Speculative |
| 15 | B1 | B+ | 6 | Highly Speculative |
| 16 | B2 | B | 6 | Highly Speculative |
| 17 | B3 | B- | 6 | Highly Speculative |
| 18 | Caa | CCC+ | 7 | Substantial Risk |
| 19 | Caa1 | CCC | 7 | In Poor Standing |
| 20 | Caa2 | CCC- | 7 | In Poor Standing |
| 21 | Ca | CC | 7 | Extremely Speculative |
| 22 | C | C | 7 | May be in Default |
| 23 | NR | NR | 8 | Unknown rating or unrated bond |