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Training Courses > Debt Markets

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Introduction to Debt Markets, (Two Days)

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This course is about bond markets and will explain the following:

  • How bonds work and the terms used in bond markets
  • The process of asset liability management
  • The issuance process & all in costs
  • How swaps are used with bonds from both an asset and liability perspective
  • The risks that bonds contain
  • Structured bonds, what they are and how they work
  • How credit derivatives and collateralized debt obligations work
  • How & why CDOs have altered issuers & investors use of bond markets

Training will be in a workshop format. This will include a mixture of presentation and case study material.

Below is a summary of the workshop content. Both days have been placed in a logical sequence and address the main products, motivations and risks from a practical perspective. Prior knowledge of debt markets is not required.

Day One

Bond Terminology & Structures

  • Interest calculations and day count conventions
  • The cash-flow structure of bonds
  • Fixed coupon securities
  • Floating rate notes
  • Zero coupons bonds
  • Flexibility of medium term notes
  • Where to find static data
  • The importance of ratings

Why Issuers use bond markets

  • The different issuers of bonds
  • Liability management
  • The difference between long & short term financing needs
  • Relative cost of funding
  • Diversification of funding sources
  • Regulatory requirements

Why investors buy bonds

  • Different types of investor
  • Asset management
  • Different risk/reward needs
  • Credit, interest rate, foreign exchange risks
  • How investors identify value
  • Relative value/spreads
  • Liquidity

The Issuance Process

  • Market conditions
  • Selecting the appropriate bond structure
  • Issue size
  • Role of the manager
  • Fees
  • The all in cost of funds

Interest rate swaps & currency swaps

  • How IRS & CCY swaps work
  • How swaps are priced and traded

Using swaps with bonds

  • How interest swaps are used with new issues
  • Calculating all in costs
  • How currency swaps are used with new issues
  • Calculating the all in cost
  • Influence of the basis swap on pricing

Day Two

Bonds and market risk

  • Introduction to why bond prices change:
  • Credit risk
  • Interest rate risk
  • Simple measures for interest rate risk

Asset swaps

  • How fixed coupon bond are swapped
  • The Libor based return
  • Up-front premium payments

Structured bonds

  • Why investors buy them
  • The advantages to the issuer
  • What the dealer gets
  • Documentation
  • Selected classic structured bonds ­how they work

Credit default swaps, (CDS)

  • How a CDS trade works
  • What the premium is
  • The main terms used
  • Risk transfer for structured transactions

Collateralised debt obligations & structured debt

  • Market background
  • Why these deals are being originated from both an asset and liability perspective
  • How these transactions work
  • The key terms used including: collateral, ramping, issuing vehicle, (SPV), tranches, (senior, mezzanine, equity), ratings, attachment points and subordination, waterfalls, diversification, role of the manager and rating agency

Transaction examples including:

  1. Cash CDO
  2. Synthetic CDO
  3. CDO squared

End of workshop & review

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