Bloomberg Integration in Fixed Income
Bloomberg for Education Seminar
July 21, 2017
San Francisco
Paul Fjeldsted, CFA
Senior Lecturer
Jon M. Huntsman School of Business
Utah State University
Outline
Overview
• Rationale
• Class Overview
• Bloomberg Market Concepts
• Problem Sets
• Bloomberg In-Class Integration
• Investing Practicum Integration
Rationale
Why Bloomberg?
Pros Cons
• Connection to practice • Cost
• Dynamic • Interface
• Robust
Rationale
Configuration
• 9 desktop licenses in dedicated lab for students
• 3 Bloomberg Anywhere licenses for professors
• Bloomberg Anywhere can be launched in any classroom
Fixed Income Course Overview
FIN 5300 FIXED INCOME
• 20-25 students, masters level course
• CFA Curriculum integration – Level 1 and
Level 2 Fixed Income volumes
Fixed Income Course Overview
Grading
Exams (4 @ 100 each) 400
Problem Sets 50
Investment Activity 30
In-Class Questions 20
Total 500
Bloomberg Market Concepts
Bloomberg Market Concepts
• Required within first two weeks of semester
• Prerequisite to handing in first problem set
• Overview – high level
• Brings students up to speed on language of finance
Bloomberg Problem Sets
Bond Valuation Problem Sets – General Approach
• Select a bond in Bloomberg
• Model its cashflows in excel
• Replicate price
• Replicate risk measures
Bloomberg Problem Sets
Example – US Treasury Note Problem Set
• In Bloomberg, select US Treasury note or bond with at least 10 years
remaining
• Pull up the bond in Bloomberg. Assume $1,000,000 face value
• Type "YA" for yield analysis. Download this page
• Create excel model of the bond. Calculate full price, accrued
interest, flat price, duration, modified duration, risk, and DV01
• Turn in Bloomberg YA page and spreadsheet. For full credit
spreadsheet should match Bloomberg YA page precisely
Bloomberg Problem Sets
US Treasury Note Screenshot
•
Bloomberg Problem Sets
US Treasury Note – Excel Model
Bloomberg Problem Sets
US Treasury Note - Side by Side Comparison
Bloomberg Student Spreadsheet
Duration (Macaulay) 8.776 Convexity Calc
Modified 8.672 Change in YTM 0.01%
Risk 8.691 P0 997,808.42
Convexity 0.852 P- 998,677.92
DV01 869 P+ 996,939.77
Face 1,000,000 (P- + P+ ) - 2(P0) 0.854
Full (Dirty) Price 1,002,132.47 Full Price 100.21325
Less Accrued 4,324.05 Convexity 0.852
Flat (Clean) Price 997,808.42
Bloomberg Problem Sets
Apple Corp Bond Screenshot
•
Bloomberg Problem Sets
Apple Corp Bond – Excel Model
Bloomberg Problem Sets
Apple Corp Bond - Side by Side Comparison
Bloomberg Student Spreadsheet
Duration (Macaulay) 4.525 Convexity Calc
Modified 4.472 Change in YTM 0.01%
Risk 4.566 P0 1,015,815.64
Convexity 0.230 P- 1,016,272.33
DV01 457 P+ 1,015,359.19
Face 1,000,000 (P- + P+ ) - 2(P0) 0.235
Full (Dirty) Price 1,020,915.64 Full Price 102.09156
Less Accrued 5,100.00 Convexity 0.230
Flat (Clean) Price 1,015,815.64
Bloomberg Problem Sets
Citigroup FRN Screenshot
•
Bloomberg Problem Sets
Citigroup FRN – Excel Model
Bloomberg Problem Sets
Citigroup FRN - Side by Side Comparison
Bloomberg Student Spreadsheet
CITIGROUP FRN - CUSIP XS1134518312
Face 100
Bloomberg Price 96.793
Last LIBOR Reset 1.18456%
Margin 0.25%
Total Current Coupon 1.43456%
YTM 2.34% Goal Seek
Assumed LIBOR Rate - Future Periods 1.31%
Discount Margin (%) 1.03%
Discount Margin (bp) 103.37
Periods / Year 4
Current Period USD Coupon 0.35864
Future Periods USD Coupon 0.38881
Settlement Date 7/21/2017
Last Coupon 5/10/2017
Elapsed Days 71
Bloomberg Problem Sets
US Treasury TIPS Screenshot
Bloomberg Problem Sets
US Treasury TIPS – Excel Model
Bloomberg Problem Sets
US Treasury TIPS - Side by Side Comparison
Bloomberg Student Spreadsheet
Index Assumptions
Base CPI at Issue Date 218.08532
CPI at last Coupon Date 244.61839
Flat Index Ratio 1.12166
Reference CPI Settlement Date 244.65884
Index Ratio 1.12185
Face Value 1,000
Flat Price 1,166.93
Inflation Accrual 0.19
Principal (Adjusted for Inflation) 1,167.12
Accrued Interest 0.23
Full Price 1,167.35
Inflation Compensation 121.85
In-Class Bloomberg Integration
Concept Illustration – Perpetual Bonds
• Security Finder <SECF> <GO>, Fixed Income, Govt
• Maturity Tab =>Perpetual
• City of Hull, UK 3.5 Perpetual Bond Issued 8/1887
In-Class Bloomberg Integration
Concept Illustration – Real vs Nominal Rates
• Bring up current 10-year UST <CT10> <GOVT> <go>
• Graph Curves <GC> <GO>
• Add Curve [type in TIP, US Treasury TIPS curve populates]
In-Class Bloomberg Integration
Concept Illustration – MBS Prepayment
• Bring up MBS to be analyzed (cusip 3135AFTA2)
• Yield Table <YT> <GO>
In-Class Bloomberg Integration
Concept Illustration – OAS and Z Spread
• Bring up callable bond to be analyzed (cusip XS1568966672)
• Yield and Spread <YAS> <GO>
Course Overview - Practicum
FIN 5470 FIXED INCOME PRACTICUM
• 10-12 students, masters level course
• Students manage $100K fixed income
portfolio over two semesters
Course Overview - Practicum
Bloomberg Integration – Bond Portfolio Management
PRTU Portfolio Administration
PORT Portfolio & Risk Analytics
PTT Portfolio Trade Ticket
FA Financial Analysis
DRSK Default Risk
MRSK Muni Credit Risk
TDH Trade History
FIHZ Fixed Income Horizon Analysis
In-Class Bloomberg Integration
Concept Illustration – Credit Risk Model DRSK
• Bring up bond to be analyzed (cusip 94974BNF5)
• Default Risk <DRSK> <GO>
In-Class Bloomberg Integration
Concept Illustration – Horizon Analysis
• Bring up bond to be analyzed (cusip 631060BP4)
• FI Horizon Analysis <FIHZ> <GO>
section title optional
“Anything you can do
Bloomberg can do better.”
Cordell Hull, USU Huntsman School MSFE Student
Thank You
paul.fjeldsted@usu.edu
Appendix
Bloomberg Fixed Income Pages
USD <go> US Treasurys Benchmark Issues
TII <Govt> <go> Listing of all TIPS
C <Corp> <go> Listing of all bonds issued by Citigroup
AAPL <Corp> <go> Listing of all bonds issued by Apple
YA or YAS <go> Yield and Spread Analysis
SECF <go> Security Finder
CT10 <go> Current 10Y US Treasury
GC <go> Graph Curves (yield curve)
YT <go> Yield Table (mortgage backed securities)
PRTU <go> Portfolio Administration
PORT <go> Portfolio Analysis
DRSK <go> Default Risk (corporate)
MRSK <go> Default Risk (muni)
TDH <go> Trade History
FIHZ <go> Fixed Income Horizon Analysis
