Set up instrument data: Bonds

Created by Erik Åkerlund, Modified on Mon, 20 Feb 2023 at 02:29 PM by Erik Åkerlund

Bonds need an instrument data setup before deals can be registered. 

Here's how it works:

  1. Go to Register > Instrument Data > Bonds
  2. Create a new instrument (F4) or edit an existing instrument

  3. Below you can find descriptions and explanations for all the fields and settings available.
  4. Scroll down for instructions on the Coupons tab.
Enter the name of the instrument.
Restriction R
Mark if the register only should be accessible for change by the users with user type manager in the user identity register. If left blank the user who has the right of access to the register can also make changes in the register.
Int conv
Enter the convention relevant for the instrument.
If “Act/365” is specified, the actual number of days in the Calculation Period or Compounding Period in respect of which payment is being made divided by 365;
If “Act/360” is specified, the actual number of days in the Calculation Period or Compounding Period in respect of which payment is being made divided by 360;
If “30e/360” or “Eurobond Basis” is specified, the number of days in the Calculation Period or Compounding Period in respect of which payment is being made divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30/day months, without regard to the date of the first day or last day of the Calculation Period or Compounding Period unless, in the case of the final Calculation Period or Compounding Period, the Termination Date is the last day of the month of February, in which case the month of February shall not be considered to be lengthended to a 30/day month).
If “30u/360” or “USbond Basis” is specified, the number of days in the Calculation Period or Compounding Period in respect of which payment is being made divided by 360 (the number of days to be calculated on the basis of a year of 360 days with 12 30/day months.                 Each month is assumed to have 30 days, with an exception that if the last day is the 31st and the first day is not 30th or 31st then that month has 31 days
 ACT/ACT ICMA if you choose ACT/ACT you can check ICMA. ICMA means that all coupon payments are the same amount
Choose if you want the system to default or lock the instrument to buy or sell in deal input.
Issuing and paying agent (for example Bankers trusts, Euroclear). Used for commercial paper and Medium term note facilities. The list box contains counterpart codes.
Base int
Libor, Stibor, Discount rate etc. are stated here. The base interest is only entered for information purposes and not used in analysis. The field is not mandatory.
Choose if you want the system to default or lock the instrument to spot (On balance) or forward (Derivative, Off Balance) in deal input
Isin code for the instrument.
Value days
The number of default banking days between deal date and value date at the inception of the transaction. The number of days entered here will automatically trigger a value date in the registration form based on the deal date taking into consideration any Saturdays/Sundays or bank holidays in between.
Enter the currency that the instrument is denominated in. Mandatory.
Oth C/R
Enter  other cost/revenue as a percentage figure. The cost/revenue is calculated in deal input based on nominal amount in the transaction.
Start and End date
The dates are used to define the start and end date of a bond issue.
Counterpart BD
Check if the bank holidays for the local currency of the counterpart  should be considered
Amount rounding
Amount rounding is used to define the amount rounding rules for the instrument in deal input. Residual means that rounding is performed only on the residual amount in the transaction. If rounding is used the number of decimals for rounding must be entered. Recommended - 'Each Amount' and either '0' or '2' in 'No of dec'
Atomatic interest fixing
Automatic interest fixing in Confirm start-Reconciliation/Settelment icon for Bonds with variable intrerest
  Fix Days

Number of fixing days ( business days). Default is is set to 2 days

Category is an extra sorting order in addition to the portfolio codes. The purpose of the Category is to be able to use as a common denominator for different instruments and spanning over different portfolio codes such as Strategies, Deal types, Transaction types. The category code can be used as a sorting variable in the Report manager and Balance sheet/Risk analysis reports. Category codes must be predefined in Register – Setup – Base code table (as type CA).
Yield curve spot/fwd
Enter the name of the Interest code used in yield curves for market valuation of the instrument (Spot) and (Forward). This is the code, with attached interest rates, that the program will look for in the interest rate tables when market valuation is requested in reports. Different codes can be used for spot and forward instruments.
The code to be used here must first be defined in the Base code table under Register/Setup
+/- %
The +/- field is related to the interest code fields. It is used too add/deduct a spread to the interest code entered in the 'Yield curve spot/fwd' field. This addition is used throughout the yield curve in market valuations. The idea here is that a single yield curve can be used for a number of instruments by adding a different spread for different instruments. Hereby the need is minimized for downloading numerous different yield curves everyday for market valuations.
Int code + currency
Check for use of the interest code entered in the 'Yield curve spot/fwd' field to be used together with a currency code as a total interest code in the interest rate register.
For example:  We are defining an instrument called EURODEP to be used in transaction registration for all eurodeposits in different currencies. The interest code in the previous field is DEP for the EURODEP instrument. But the different currency deposits must be market valued by using different yield curves for each currency. Each yield curve in the interest rate tables defined by its interest code should therefore be named DEPUSD, DEPEUR, DEPSEK etc.
By checking the Int code extention box we tell the program for all EURODEP transactions to look for a yield curve with the name DEP plus the currency code of the transaction, when interest rate gain/loss shall be calculated in various reports.
OM fee
Enter the fee connected to forward started Bonds per contract . Used in OM report.
Price factor
Enter price factor for cheapest to deliver. This is only valid for bond futures.
Yield curve
There are three yield curve types used in the system, Benchmark, Fixed Period codes and Days to maturity. These types distinguish three different ways of finding an interest rate or bond/money market price to apply to the instrument in market valuations.
Short-term deposit instruments, FRAs and interest rate swaps normally use Days to maturity as the yield curve type.
Treasury bills and Commercial paper may use days to maturity, or have a fixed period quotation in the market each day based on remaining number of days to the IMM date at which it matures.
Bonds normally have a benchmark bond quotation to use as the basis for the valuation.
Enter the button that applies to each instrument in the system.
The various benchmark codes, period codes and days to maturity definitions must also be entered in the menu alternative Interest rate periods under Register Setup before interest rate tables can be entered and used in the reports. Note that FRN bonds needs an additional yield curve for market valuation. The yield curves should be entered in Register – Interest Rate/Price/Volatility tables. The names of the yield curves should be SPREAD followed by a currency code, for example SPREADSEK, SPREADEUR and so on.
Price rounding
The price-rounding field determines the decimal rounding rules for price quotations derived from interest. For instance when calculating interest rate gain/loss in profit/loss analysis and market valuations it is necessary to calculate price from interest depending on what market rates are available.
First column displays the number of decimals for calculation of bond price given from interest rate. Used in deal entry and analysis.
Second column displays the number of decimals for calculation of bond price given from interest rate. Used in Repa entry and analysis.
Enter period for interest rate adjustment for FRN bonds. This is an information field and the infromation is only used as default when entering coupon data.
Reconciliation days
The number of days before coupon date (first field) and amortisation date (second field) that reconciliation of actual bond holding take place. The second field is applicable for amortising bonds only.
Coupon int conv
In many cases the 'Coupon interest convention' is the same as the 'Int conv' entered in the 'Base data section. But for some bond issues the interest convention for calculating bond coupon amount  is different from the convention used for the yield calculation when the bond is traded/issued.
The issuer of the bond. This is a mandatory field when bond coupon transaction are created automatically the first time the bond is bought or issued. (NOTE! System Parameter setting  "Create coupon transactions" should be checked).
Issued am
 The total issued amount for the bond. Not mandatory.
 Check for deflation protection of CPI linked bonds.
CPI base
 Enter base for consumer price index for CPI linked bonds.
Zero coup
 Not in use.
Floor base
 Base interest can not be below zero. At fixing via confirm start base is fixed at zero if it is a negative interest
Floor tot
 Total interest (base interest + spread) can not be below zero ( no negative interest)

Coupons tab

  1. When opening the Coupons Tab you will be asked if you want to start the Coupon Wizard. Press Yes if no coupons have been previously registered.

  2. Enter relevant information. Click on OK to automatically generate the coupon plan.

    If you want to edit a coupon, select it and double-click on the coupon row to update details.

Amortisations Tab

Used for Bonds with an amortisation structure.

Put/call Tab

Used for Bonds with Put or calls options and Bonds with fixed interest with an interest adjustment.

Enter put/call date
Value date
If put/call date is a non-banking day the value date will adjust to the next valid bank date.
Rec date
The date when the actual bond holding is reconciled
Int adj
Check if interest rate adjustment in the coupon plan is to be made at this date.
Check in there is a put option to repay the bond
Put rate
Enter the put rate
Check in there is a call option to repay the bond
Call rate
Enter the call rate
Check in there is an option to convert the bond to equities.
Conv rate
Enter the convertion rate

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