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Bond Financing and Repo Fee: £1,500 + VAT
London - UK
Introductory but challenging course providing a comprehensive overview of the bond lending and financing markets, with focus on the repo trader's perspective. Uses SunGard's Personal Apex software for interactive trading exercise.
  
01 - 02 March 2018 London, Liverpool Street
 
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Course Director(s)
Paul Carroll
 

Very good overall introduction as well as good detail and in depth coverage. Is taught from the perspective of real life market/trading.
Andrew Levene, Sungard
 
What You Will Learn Is This Course Right For You?  
This introductory/intermediate course provides a comprehensive overview of the fixed income repo product. You will be introduced to the economic motivations of market players and learn the main trading structures, delivery methods, risk elements and documentation. As part of a small group, you will employ alternative trading structures in an extensive case study using SunGard's Personal Apex trading software. You will gain an understanding of the role of the repo desk as the 'hub' of the fixed income trading floor. You will learn what factors drive demand to borrow specific securities and create 'specials' in the market through a review of the main bond trading strategies.
 
Course Overview    
Understanding the Economic Functions of Repo
Financing long positions/lending bonds for yield enhancement; financing short positions/collateralising a cash investment; Central Bank open market operations; Supply and demand effects on repo rates; general, specific and 'special' collateral.

Case Study Part I Participants examine a number of repo transactions and identify the motivations of all players.

Essential Financial Arithmetic
Time value of money; market calculation conventions; the money market: instruments and pricing; the bond markets: price/yield relationship.

The Mechanics of Repo: Alternative Structures
Classic repo; buy/sell backs; tri-party repo, Bonds borrowed; Initial margin (haircuts) and marking to market/repricing. Delivery repo, hold-in-custody and safekeeping repo.

Exercise: Pricing and Buy/Sell Back

Risks and Documentation
Counterparty risk; collateral risk; issuer risk; recharacterisation risk; market risk. Documentation: key clauses in the PSA/ISMA Global Master Repurchase Agreement.

Total Return Swaps

An In-Depth Look at Electronic Trading
Overview of electronic trading platforms, inter-dealer systems, straight-through processing of transactions, on-line trading capability, price engines.

Case Study Part II
Participants are given a typical trading scenario of positions to manage. They will trade the positions with a view to maximising repo profits, and examine their virtual P/L using Apex TM

Trading and Hedging Strategies Supported by Repo
The central role of the repo desk on the trading floor: Supporting the fixed income sales desk; hedging new issues, swap books, option positions; financing long and short positions of bond traders involved in: creating a tail, short hedge and long hedge, yield spread arbitrage. Matched book trading.
Exercise: Repo and Spread Trading

The Implied Rate: Basis Trading
Bond futures: notional bond, conversion factors, cheapest to deliver, carrying costs and the implied repo rate, gross and net basis; cash and carry arbitrage.
Exercise: Cash and Carry Arbitrage

Repo Clearing and Netting
Overview of central clearing and netting; Forms of netting, the benefits of central clearing, the mechanics; Risk management and margining in clearing; the major service providers.

Repo and the Yield Curve
The effect of repo on value along the yield curve: understanding the break-even forward yield curve; forward pricing and repo; "when issued" bonds and related repo strategies; Using repo to enhance returns: total returns of individual issues and outperformance against a benchmark.
Exercises: - Repo and the Yield Curve / Repo

 

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