PART 1

PART1

Thisreport evaluates the data in Bloomberg screen to assess various someof the fixed income securities. A sample of few bonds, notes andtreasury bills have been selected from the Bloomberg screen for thisproject. The key components that were used for the analysis includethe maturities of the bonds, the price, coupon payment, yield tomaturity (YTM) and the issuance details. The analysis is as describedbelow

USTreasury N/B

Bond_2-1.gif

T2 11/15/42 Govt.

Thisbond has 36 months to maturity. Bond’s maturity refers the periodfor which financial investments remains outstanding. This impliesthat, on the maturity of the fixed income investment, the financialinstrument lapses and the principal together with the last interestare paid back to the appropriate holder.

Thebond has a price of $93.7722. The price of a bond is obtained bydiscounting the expected cash flows to obtain their present value.The cash flows are discounted by the use of appropriate discountingrate stated by the issuer in the bond’s description.

Thecoupon proportion of the bond is 2.75%. The coupon rate shows theamount of payments to be paid on the bond after every given period.Coupon payment may be annually or semi-annually depending on theterms of issuance. For this bond, the coupon payments is calculatedas 2.75% of $1000 = $27.5 per annum. According to the analysis, thecoupon rate gives us the expected cash flows of the fixed incomesecurities.

Thisbond was issued on 11/15/12, and the size of issuance was 41994 (MM).The yield to maturity of this bond is 1.1919%. YTM indicates theyield computed as the total return that an investor would expect fromthe fixed income securities if held to their maturity. It alsoindicates the risk of investment and hence it is essential to theinvestors when making investment decisions.

Bond1-1.gif

T2 05/15/25 Govt.

Thisis another example of US Treasury N/B accessed from the Bloombergscreen. The following are some of the bonds descriptions.

Bond’smaturity- 25.5 months

Price- $97.0577

Couponrate- 2.125

Thissuggests that the bond is trading at $97.0577, and it comes to maturein 25.5 months. The coupon rate with indicates the cash flows of thebond shows that the holder of this fixed income security will earn$21.25 each year from the bond.

Thebond was issued on 05/15/15, and the size of issuance was 45543 (MM).The Yield to ripeness of this bond was 1.1919%. This signifies thatthe holder would earn this interest for the bonds held to thematurity.

Bond1-2.gif

T2 05/15/25 Govt.

Dateof issue 05/15/15

Bond’smaturity- 25.5 months

Price- $97.058

Couponrate- 2.2577

YTM– 1.2779

Thisbond is selling at $97.0578 and it has a maturity of 25.5 months. Thecoupon percentage of the bond is 2.2577%. This implies that the cashflows of the bond that the holder will earn is $21.25 for each yearfrom the bond.

Thebond was issued on 05/15/15 and the size of issuance was 45543 (MM).The Yield to ripeness of this bond was 1.2779%. This is the interestthat the holder would earn from the bond if it were to be held to thematurity.

Bond2-2.gif

T2 11/15/42 Govt.

Dateof issue 06/22/15

Bond’smaturity- 33 months

Price- $94

Couponrate- 2.925

YTM– 1.1728

Bond2-3.gif

T2 11/15/42 Govt

Thisis an example of a note that represents a fixed income investment,and its analysis as per the Bloomberg data is shown below.

Dateof issue 11/15/12

Bond’smaturity- 33 months

Price- $94 -01

Yield– 3.0738%

Thisnote is selling at $94, and it has a maturity of 33 months. The notewas issued on 11/15/12, and the face value was 1000M. The Yield ofthe note is 3.0738%.

Bond3.gif

T2 05/15/25 Govt.

Thisis another example of a note of fixed income investment, and it hasthe following descriptions.

Dateof issue 05/15/15

Bond’smaturity- 25.5 months

Price- $98

Yield–2.2577%

Thisnote is selling at $98, and it has a maturity of 25.5 months. Thenote was issued on 05/15/15 and the face value was 1000M. The Yieldof the note is 2.2577%.

PART2

Termstructure of interest rates

Theterm structure of interest rate shows the prices of discounted bondsand other fixed income securities at their maturities. For instance,consider our Bond_2-1.gifin part 1 above and then Term structure interest rate can becalculated as follows

100= + + =&gt r = 27.1189%

Calculationsand analysis

Seethe excel spreadsheet attached to these workings.

Findingsand recommendations

Fromthe graph (worked out in excel spread sheet), the term structure inincreasing. The rate of increase is proportional to the interestrate, and it is increasing at a constant rate. This signifies thatthe interest charged on the fixed income securities is equallydistributed over their respective durations. Team Structure,therefore, plays an essential role when it comes to making investmentdecisions.