The Complete Practitioners Guide to the Bond Market

The Complete Practitioner’s Guide to the Bond Market addresses the principles of the bond market and offers the tools to apply them in the real world. By tying the concepts of fixed-income products to big-picture aspects of the economy, this book prepares readers to apply specific tools and methods that will help them glean profits from the bond market.

Introduction:

Over the past 20 years I have taught various aspects of the fixed-income markets to well over 10,000 market professionals. My courses can run for weeks, targeting audiences who need broad coverage, beginning with fundamental time value of money concepts and going all the way to incorporating complex derivatives in portfolio management. Other participants require specialized topics, such as callable bonds or interest-rate swaps, and these sessions can last for a day or two. Whatever the structure, my courses were taught in an intuitive, yet rigorous, manner and appealed to those looking to really understand the material, not simply record or memorize it. Invariably, after attending these sessions, participants have asked why I have not produced a book. After many years, I finally acceded, and this is the result.

My purpose in writing this book is to explain how the market works, what the instruments are and how professionals use them. I will also introduce you to much of the jargon of the fixed-income markets. My success in teaching over more than two decades lies, I am told, in my ability to explain esoteric ideas in common, everyday language, without sacrificing correctness. If you like an intuitive approach, this book is for you.

Fixed income does not need to be a dry subject. Stocks may present the allure of a dynamic market, with the potential for rapid wealth creation (and destruction), whereas bonds suggest to most people the unexciting prospect of just earning coupons while worrying about default. Not true. Fixed-income securities are more varied than equities, and they can be quite volatile, thereby presenting the opportunity for significant short-term gains yet at the same time providing a platform for long-term returns, and they allow for a variety of ways to go about investing and trading.

How does this book differ from all other bond books? First, as I mention above, it presents both the basic and the advanced concepts in an intuitive manner, without sacrificing rigor. I want you to understand why the market works the way it does, not just accept what you are told about it. Second, I’m not an academic observer of the bond market. I’m an insider, a participant in the market. I’ve been a bond dealer, institutional portfolio manager, and trader (a.k.a. speculator). So this book tells you what the market is really about, not what someone believes the market is about. It explains how professional investors and traders actually apply the concepts. I don’t present concepts and ask you to apply them. I show you exactly how to do it.

Contents: