Fixed Income Analysis - Part 6 (2019)

Fixed Income Analysis - Part 6 (2019)



Most global capital market instruments are some form of tradable debt security (“bond”). The term “fixed income” is often used to refer to the whole bond market since the vast majority of these securities (although not all) have regular, fixed, interest payments (“coupons”). Bond valuation requires methods of calculating and comparing the current values of multiple potential future cash flows.

Module 1 introduces the basic concept of the inverse price/yield relationship and explains how prices and yields are calculated for simple “bullet” bonds.

Module 2 looks at the ratings attached to high yield debt, the key structures used, and the primary and secondary markets for these assets.

Module 3 looks at the key features of FRNs, examines how FRN coupons are determined, discusses the price sensitivity of FRNs as expressed by effective duration, and shows how the discount margin on FRNs is calculated in Excel.


On completion of this course, you will be able to:
- Recognize the importance of fixed income analysis, and the significance of the inverse price/yield relationship
- Calculate the yields for bullet bonds
- Identify how coupon frequencies and day count fractions affect the various calculations
- Recognize how high yield debt is graded by the main ratings agencies and recall how the market for high yield assets developed
- Identify the key structures and features of high yield debt
- List the key participants in the primary and second markets for high yield debt
- Identify the key features of FRNs
- Recognize how an FRN coupon is calculated using a benchmark index and reset margin
- Recall how the effective duration for FRNs is typically close to zero
- Calculate the discount margin on an FRN using Excel


Module 1: Fixed Income Analysis - An Introduction
Topic 1: Bond Price & Yields
Topic 2: Effective & Nominal Rates
Topic 3: Valuation Between Coupon Dates
Topic 4: Shortcomings in Yield as a Return Measurement

Module 2: High Yield Debt
Topic 1: Features of High Yield Debt
Topic 2: High Yield Debt Structures
Topic 3: Markets & Market Players

Module 3: Floating Rate Notes (FRNs)
Topic 1: Features of FRNs
Topic 2: Dynamics of FRNs


SFC:2.5, PWMA:2.5
All Member: HK$700
Staff of Corporate Member: HK$700
Non-Member: HK$975