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Bonds in a Day

Everything you need to master the mathematics that drives bonds

By Stewart Cowley
Cover of Bonds in a Day (Paperback) by Stewart Cowley Cover of Bonds in a Day (Ebook - phone) by Stewart Cowley Cover of Bonds in a Day (Ebook - tablet) by Stewart Cowley

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About the Author

Stewart Cowley

Stewart Cowley has been working in financial markets since 1987. He is one of a handful of people to have ever held a triple-A rating by Standard & Poor’s and was awarded the prestigious Gold Medal for long-term investment performance by FE Trustnet. He has also been one of the UK’s most visible fund managers, having written for the New Statesman, the Sunday Telegraph and Citywire. He has ... Read more on Stewart Cowley

Contents Listing

About the Author

1. Introduction

2. 'Piero the Gouty' and Other Interesting People
2.1 Confounding compounding
2.2 Example of interest over one year
2.3 Example of compound interest over more than one year
2.4 Example of compound interest over more than one year - the easy way
2.5 Some tips on using spreadsheets
2.6 The power of compounding
2.7 But I want my antipasti!
2.8 Example of calculating the required rate of interest
2.9 Don't dismiss discounting
2.10 Example of discounting for one year
2.11 Example of discounting over more than one year
2.12 Pricing a bond
2.13 Example of pricing a bond when the interest rate and yield are the same
2.14 Example of pricing a bond when the interest rate and yield aren't the same
2.15 Monkeys eat bananas upside down
2.16 Example of day-count differences
2.17 Pricing a bond - the short way

3. Stop Being an Adolescent - Yield to Maturity!
3.1 Calculating yield to maturity
3.2 A very inconvenient relationship
3.3 Things to notice about the price/yield relationship
3.4 In for the duration: Macaulay and modified duration
3.5 Example of using modified duration to reprice a bond
3.6 Duration's less good-looking brother - convexity
3.7 Example of correcting for the effect of convexity
3.8 Calculating convexity using a spreadsheet

4. Never Mind the Yield - Feel the Total Return
4.1 Method for total return analysis
4.2 Example of the total return calculation

5. Be a Freud - be Very a Freud
5.1 Computing total rates of return over an investment horizon
5.2 Example of horizon analysis
5.3 Scenario analysis
5.4 Example of scenario analysis under various yield shifts

6. Is the Yield Curve Just a Capitalist Plot?
6.1 Yield curve steepness
6.2 The yield curve and the economic cycle
6.3 Yield curve theories

7. When Nothing is the Best Thing You Can Do...
7.1 Example of the passage of time

8. Individual Bonds Versus Portfolios

9. Man is Born Free, and Everywhere he is in Bonds
9.1 The non-government bond markets
9.2 Assessing the adequacy of non-government bond yields
9.3 Method for corporate bond total return analysis
9.4 Example of a non-government bond total return analysis

10. Bringing it All Together
10.1 Method for multi-variable total return analysis
10.2 Example of multi-variable total return analysis

11. Outro...
About the Author

1. Introduction

2. 'Piero the Gouty' and Other Interesting People
2.1 Confounding compounding
2.2 Example of interest over one year
2.3 Example of compound interest over more than one year
2.4 Example of compound interest over more than one year - the easy way
2.5 Some tips on using spreadsheets
2.6 The power of compounding
2.7 But I want my antipasti!
2.8 Example of ...

Jacket Text

The bond markets can be a bewildering place - the words, the concepts and the mathematics can be mind-bogglingly confusing even to seasoned professionals. In this step-by-step guide, Stewart Cowley - one of the UK's best-known bond managers - takes investors through the basics they need to know to begin understanding bonds.

From compound interest, through yield calculations, how the bond markets work and how to make the most out of the bond markets, this practical, easy-to-read handbook uses spreadsheet examples combined with a wealth of experience to help you work through real-world examples of bond management.

Professional Reviews

As the title suggests, Bonds in Day is an introductory text to the world of bond mathematics. The author assumes no knowledge on the part of the reader and explains each new concept as it comes up in a simple and informative manner, often mixed in with a few humorous stories.... Any investor interested in improving their knowledge should purchase this book, a well written, step by step guide to this important market. Master Investor issue 39

Along the way the commentary provides everything from an insight into the history of bonds, the relationship between the yield curve and economic cycle, and classification of different bonds and their risks. He makes good use of a wide range of off-the-wall analogies to lighten what can be a dry subject. For example, his comparison of how a monkey eats a banana can provide you with a guide to calculating how much interest a bond has earned. Gavin Haynes, managing director of Whitechurch Securities Wealth Managers


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Media Coverage

Master Investor Issue 39

As the title suggests, Bonds in Day is an introductory text to the world of bond mathematics. The author assumes no knowledge on the part of the reader and explains each new concept as it comes up in ...

Read more

FT Adviser

With 30 years of experience having headed up bond teams at Invesco, Newton and Old Mutual, there is no doubt that Mr Cowley knows his stuff. His challenge is to simplify what is undoubtedly the most ...

Read more

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