Added the WI User Guide which is now accessible from the Help menu. This document serves as a complete tutorial on modeling up the WI, which is particularly important with the upcoming 3, 10, 20, and 30-year auctions this month
As the TBAC officially announced that the 20-year auction will take place on Wednesday, 5/20/2020, follow these steps to model it up in RiskVal.
1. Click on “New”
2. In the “When Issued Creator”, check “Show All” to select a non-CT bond as the BM.
3. Select T 4.375 15-May-2040s from the “Benchmark” dropdown.
4. (Optional) Check “Range” to model up multiple 20-year WI bonds with varying coupon assumptions. The example below uses a coupon range of 1.00 – 1.375% with a coupon increment of 0.125.
5. Set “Interest Accrue Date” to 5/15/2020
6. Set “Maturity Date” by entering either “20y” or “05/15/2040”
7. Set “Issue Date” to 6/1/2020
a. 6/1/2020 is also the First Settlement Date. The 20-year will settle on Monday, 6/1/2020 because 5/31/2020 is a Sunday.
b. The WI 20-year bond Interest Accrue Date is 5/15/2020, which means that on the Issue Date (5/20/2020), the Dirty Price will also include Accrued Interest from 5/15/2020 to 6/1/2020
8. Click “Create”
Given the high demand for the upcoming 20-year issuance, traders can mark the “Liquidity” assumption to better estimate the “Total Roll”. If a trader feels the new 20-year WI will be in higher demand compared to the benchmark, then adjust the liquidity with negative bp value, which means the WI will trade slightly richer.
Updated the WI Strip column names in the default-SP view
Set the System View to “default-SP” under “Table” – “System View”.
Set the “Roll Method” as the “SP Curve Roll” which sets the “Total Roll” value equal to the “S&P Impl WI Roll”, assuming the S+SP bonds prices are correct
o S&P Impl WI Roll = 100 * (S&P Impl WI Yld – S&P Impl BM Yld)
o S&P Impl WI Yld: Fwd yield of WI bond implied from the Strip curve
o S&P Impl BM Yld: Yield of the Benchmark bond implied from the Strip curve
Use the “S&P Impl WIP Roll”, which is a STRIP-recon calculation. This is a forward STRIP calculation based on the S and SP spot price, and WI S and WI SP forward prices.
o S&P Impl WIP Roll = 100 * (S&P Impl WIP Yld – S&P Impl P Yld)
o S&P Impl WIP Yld: SP derived WI whole bond yield calculated using STRIP-recon based on S + SP forward price
o S&P Impl P Yld: SP derived CT whole bond yield calculated using STRIP-recon based on S + SP spot price