bond-relative-value

Bond relative value analysis decomposes spreads into rate, credit, and residual components to determine if a bond is rich, cheap, or fairly priced. It combines pricing, yield curves, credit spreads, and scenario stress testing to quantify P&L impact.

Spread decomposition computes the G-spread, extracts the credit curve spread at maturity, and calculates the residual spread to isolate liquidity and technicals. This separates the credit component from rate movements to identify true relative value.

Yes, scenario stress testing runs parallel rate shifts from -100bp to +100bp to produce price change and P&L tables per 100 notional. This applies to corporate, sovereign, and municipal bond comparisons to quantify scenario risk.

You need bond identifiers (ISIN, RIC, or CUSIP) plus access to interest rate curves, credit curves, bond pricing, and yieldbook scenario data. Optional historical pricing can be added to calculate Z-scores for additional context.

Compare the corporate bond against sovereign and issuer credit curves to produce a spread decomposition and scenario P&L table. The analysis outputs a recommendation with the specific basis point move that would alter the view.