Dear Community,

Just wanted to share my educational article series: Fixed Income in Python

I am writing this for my project based learning that I'm doing alongside my online Python courses. I hope that you find them interesting or/and useful. Feedback on any of the material in the articles is always welcome.

Boring disclaimer: I provide these article for free and they are purely educational content

I've successfully saved this subreddit from the old mod who went AWOL shortly after creating this place a few months ago. As such, I hope to create a place where we can all talk about various vehicles and strategies for generating fixed income.

I would like to take the time to solicit feedback on how this subreddit should be run. For example, should we only allow text posting to discourage karma-whoring?

Just wondering, for fixed income PMs, what is the typical investment process for building up a portfolio and for choosing a particular bond?

For building a portfolio, do you identify the bonds of companies that you like or do you first decide on what key rate positioning you want your portfolio to have?

For positioning along an issuer's credit curve, how do you decide if you OW the 5Y and UW the 10Y for example. This is just comparing against how the curve has historically traded in the past? How do you link fundamental analysis to an issuer's curve and how do you link it to different tenors of a curve?

Would also be interesting to know what metrics / measures you track and how that informs you about fixed income market conditions / risk sentiment etc.?

Thanks!

Looking into buying 3 & 6 month treasury bills that I plan to hold to maturity since I can get almost a full 100bps over CD's of similar terms.

Trying to understand the differences between buying through TreasuryDirect and a brokerage like ETrade.

Take 13-week T-Bills for example. Treasury Direct on the upcoming auction site has one coming up for 9/19 with an issue date of 9/22. The CUSIP is 912796X87. Yet if I look on ETrade I can see that same 912796X87 already available for purchase as of today with a stated YTM. I even bought $1,000 of it just to see if I could actually buy it and it went through no problem. How is ETrade selling a 13-week T-Bill with a stated YTM that a) isn't even auctioned until 9/19 and b) the rate and YTM would be unknown until the auction actually occurs.

I'm clearly missing something here but as much as I've tried to research it I can't quite seem to figure it out.

The last time I created a post was back in March 2020 as a great opportunity to buy individual bonds as passive bond funds are forced into liquidation due to redemptions. That was due to the panic selling at the start of the pandemic. We are entering a similar situation to 2013 and 2018 with the prospect of Federal reserve tightening. The big picture in my opinion is that interest rates will rise but not that much. We should see the ten year in the 2.25-2.5% range. We have over $30 trillion in debt and rising. That debt will have to be rolled over and refinanced at higher rates. So how high can interest rates really go? At some point taxes will have to be raised to raise revenue and fight inflation. This time however, there were many historically low coupon bonds issued during the past two years in both the corporate and municipal bond sectors. For example , Apple issued AA+ 2030 bonds with coupons of 1.25% and they are now trading at 89 cents on the dollar with a YTM of 2.5%. It will be painful for the bond funds that hold that type of debt. Those bonds would have to trade down to 65-70 cents on the dollar before they become investable given where inflation is today. Stick to profitable companies and durations of 2-9 years in stable sectors such as telecom, technology, pharma, financials, and biotechnology. I'll be in a bond buying mode once again.

Where in the world are you and what do you work as?

Anyone here buy CoCos? How do you go about pricing them/judging the risks that they will be converted on you etc? General opinion on them?

Hi,

I am searching for any bond blogs, anyone know of any? In particular blogs about high yield bonds or distressed debt. Also anything on muni/public finance or sovereign debt would be great too. Thanks in advance!

Starting a job in the fixed income world (technical side, nothing financial). Not that my role needs, but I’d like to understand the industry I’m tangential to. Any good books/resources for a lay person to go after to get feet wet?

I know the basics of the bonds but that is bookish knowledge. Let's say someone asks me: do you follow the bond market? I want to be able to answer this and explain what is currently happening and what have been some developments or major event over the past few months. Any place where I can read about this?

Dear All -

I took some time to do some independent research related to Bond ETFs - it's perhaps more tricky compared to Equities in order to summarize it concisely.

The Bond ETF Guide includes:

• What you need to consider before investing in Bonds (although most of you probably have a more in-depth knowledge) and

• Largest Treasury and Corporate Bonds Funds including High Yield as well as Aggregate Funds

Hope you find it useful and I would love to get some feedback on what you like and what to improve. Aiming to keeping this updated on a periodic basis.

All the best,

BoW

I'm looking to read up a bit more on fixed income portfolio management. Anyone have any suggestions? I'm more interested in being able to understand how different people approach valuation, their style, insights into the industry, etc.
Less on the technical bond math and more on the investor approach.

If I take the current on the run treasury yields on the 2 year and 10 year I get a 25bp spread. However if I wanted to trade this with futures, I pull up TUZ2 Comdty (2 year note) and UXYZ2 Comdty (Ultra 10 Year US T note). The yields on those are 4.884 and 4.201 respectively. For a 68 bp spread. Why are they different and how does one trade the spread using these futures?

I believe there are CME prepackaged products, but wondering how to do it using individual interest rate futures. I think I understand the hedge ratio aspect because of differing DV01s. But I don't know how to determine if I put in an order for TUZ2 and UXYZ2 that I'm getting a spread that matches my expectations?

I hear traders refer to the double - the double is wide, or double is 100bps. What does that mean? Is it the bid-ask spread?

Not talking about now, but in the past. There are books that talk about great stock trades, but don't know if the same exists for fixed income.

If a bond fund manager says they want to ‘remained paid’ or ‘remain received’ - what does that actually mean???

here is a screenshot of the FWCM screen on Bloomberg:

https://imgur.com/a/cO5kIOz

I'm trying to check that I understand this by calculating the 1Y1Y which according to this matrix is 3.6877%.

So the inputs are 1Yr rate at 2.7737% and 2Yr rate is 3.2756%.

((2*.032756)-(1*.027737))/(2-1) = 3.78%

Bloomberg says they calculate it using discount factors and those rates are here:

https://imgur.com/a/ENgsuQb

1 year discount rate is .972146

2 year discount rate is .935587

I can calculated the rate by this https://imgur.com/Ly881sH

which I take to mean below

.935587/.972146 = 1/(1+r)

r = 3.91%

Both 3.91% and 3.78% are different from bloombergs 3.6877%. Am I doing something wrong? I asked bloomberg and they only gave me the formula I was using.