Price-yield relationship

Bond Valuation and Analysis in R

Clifford Ang

Senior Vice President, Compass Lexecon

Inverse relationship

Yield vs Price

Bond Valuation and Analysis in R

Credit ratings

S&P Fitch Moody's
Investment grade AAA AAA Aaa
AA AA Aa
A A A
BBB BBB Baa
High yield BB BB Ba
B B B
CCC-Lower CCC-Lower Caa-Lower
Bond Valuation and Analysis in R

Determining a bond's yield

  • Use yields of bonds with same credit rating
  • If we want to value a Baa-rated bond, we can get the data from quantmod
library(quantmod)
baa <- getSymbols("DBAA", src = "FRED", auto.assign = FALSE)
yield <- baa["2024"]
head(yield)

           DBAA
2024-01-01   NA
2024-01-02 5.57
2024-01-03 5.57
2024-01-04 5.64
2024-01-05 5.70
2024-01-08 5.66
Bond Valuation and Analysis in R

Let's practice!

Bond Valuation and Analysis in R

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