# YIELD SPREAD PADA SURAT BERHARGA YANG BERSIFAT UTANG Pertemuan 4 -mupo- YIELD SPREAD PADA SURAT BERHARGA YANG BERSIFAT UTANG Pertemuan 4 -mupo- Mata kuliah:

## Presentation on theme: "YIELD SPREAD PADA SURAT BERHARGA YANG BERSIFAT UTANG Pertemuan 4 -mupo- YIELD SPREAD PADA SURAT BERHARGA YANG BERSIFAT UTANG Pertemuan 4 -mupo- Mata kuliah:"— Presentation transcript:

YIELD SPREAD PADA SURAT BERHARGA YANG BERSIFAT UTANG Pertemuan 4 -mupo- YIELD SPREAD PADA SURAT BERHARGA YANG BERSIFAT UTANG Pertemuan 4 -mupo- Mata kuliah: F0922 - Pengantar Analisis Pendapatan Tetap Dan Ekuitas Tahun: 2010

Bina Nusantara University 3 YIELD SPREAD PADA SURAT BERHARGA YANG BERSIFAT UTANG Materi: 1. Interest rate determination 2. Yield on non Treasury rate 3. Swap spread

1. Interest rate determination Focus in: Focus in: 1.1 the relationship between interest rates offerd on different bond issues at a point in time 1.1 the relationship between interest rates offerd on different bond issues at a point in time 1.2 the relationships among interest rates offered in different sectors of the economy at given point in time. 1.2 the relationships among interest rates offered in different sectors of the economy at given point in time. Example: the FED uses the following interest rate policy tools: Example: the FED uses the following interest rate policy tools:  Open market policy  The discounted rate  Bank reserve requirements  Verbal persuasion to influence how bankers supply credit to businesses and consumers Open market policy dan merubah discounted rate sering digunakan oleh the Fed. Secara bersamaan keduanya dapat menaikkan atau menurunkan cost of funds dalam perekonomian.

2. Yields on non Treasury securities Measuring Yield spreads Measuring Yield spreads Yield spread between any two bond issues, bond X and Yield spread between any two bond issues, bond X and bond Y, computed as follows: bond Y, computed as follows: Yield spread= yield on bond X - yield on bond Y Yield spread= yield on bond X - yield on bond Y Example: on Feb, 2002, the yield on the 10 year on the run Treasury issue was 4,88% and the yield on a single A rated 10 year industrial bond was 6,24%. If bond X is the 10 year industrial bond and bond Y is the 10 year on the run Treasury issue, the absulute yield spread was: Example: on Feb, 2002, the yield on the 10 year on the run Treasury issue was 4,88% and the yield on a single A rated 10 year industrial bond was 6,24%. If bond X is the 10 year industrial bond and bond Y is the 10 year on the run Treasury issue, the absulute yield spread was: Yield spread= 6,24 – 4,88% = 1.36% or 136 basis point Yield spread= 6,24 – 4,88% = 1.36% or 136 basis point Sometimes bonds are compared in terms of a yield ratio: Sometimes bonds are compared in terms of a yield ratio: Yield ratio = Yield on bond X Yield ratio = Yield on bond X Yield on bond Y Yield on bond Y

Yields on non Treasury securities (cont’) In US, bond market when these measures are computed, bond Y (the reference bond) is a Treasury issue. The equations for the yield spread measures as follow: Absolute yield spread: Absolute yield spread: yield on bond X – yield of on the run Treasury yield on bond X – yield of on the run Treasury Relative yield spread: Relative yield spread: yield on bond X – yield of on the run Treasury yield on bond X – yield of on the run Treasury yield of on the run Treasury yield of on the run Treasury Yield Ratio: Yield Ratio: yield on bond X yield on bond X yield of on the run Treasury yield of on the run Treasury

Yields on non Treasury securities (cont’) For the above example comparing the yields on the 10 year single A rated industrial bond and the 10 year on the run Treasury, the relative yield spread and yield ratio are computed : Absolute yield spread = 6.24%-4.88% = 1.36% = 136 basis points Relative yield spread = 6.24%-4.88% = 0.279 = 27.9% 4.88% 4.88% Yield spread = 6.24% = 1.279 4.88% 4.88%

3.2 Role of Interest Rate Swap 3.2 Role of Interest Rate Swap Interest rate Swap has many important application in fixed Interest rate Swap has many important application in fixed income portofolio management and risk management. They tie income portofolio management and risk management. They tie together the fixed rate and floating rate sector of the bond together the fixed rate and floating rate sector of the bond market. market. As a result, investor can convert a fixed rate asset into a As a result, investor can convert a fixed rate asset into a floating rate asset with an interest rate Swap floating rate asset with an interest rate Swap 3.3 Determinant of the Swap spread 3.3 Determinant of the Swap spread Market participants throughout the world view the Swap Market participants throughout the world view the Swap spread as the appropriate spread measure for valuation and spread as the appropriate spread measure for valuation and relative analysis. relative analysis. Swap rate = Treasury rate + Swap sread Swap rate = Treasury rate + Swap sread where Treasury rate is equal to the yield on a Treasury with where Treasury rate is equal to the yield on a Treasury with the same maturity at the Swap. the same maturity at the Swap.

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