Fixed Income Portfolio Analytics With BondEdge

Michael R. Finley Senior Portfolio Analyst

Why Bondedge?

“Best in Class” Fixed Income Analytics Comprehensive security coverage and functionality Delivers robust risk/reward analysis Assists in developing investment strategies Design reports to meet regulatory/compliance requirements Allows CU to focus on higher value added, more strategic

work Saves time and resources

Extensive Security Coverage

US Municipal SecuritiesUS Money Market InstrumentsUS Fixed Rate Preferred StockTBA Mortgages/Generic MortgagesAgency/GSE Pass-through MBSCMOsCMBS / ABS Global High Grade Corporate BondsGlobal Interest Rate Futures

Over 3 Million Bonds

Comprehensive Analysis & Reporting

Fixed Income Portfolio Analysis & Review Cash Flow Analysis Stress testing and Scenario Analysis Pre-Post Purchase “What-If” Analysis Bond Swap Analysis Credit Reports (Upgrades/ Downgrades) Called Bonds Report IDC Pricing

Portfolio Review Insights:Portfolio Alerts- Callable

Portfolio Alerts-

Watchlist/Upgrades/Downgrades

Measuring, Managing and Controlling Risk Interest Rates/Yield Curve Risk

– Stress test/Scenario Analysis Instantaneous/aged/ Probability weighted Parallel Shifts /Non-parallel Shifts

Spread Duration Credit spread changes for sectors, industries, issuers MBS spread changes by underlying collateral/tranche types

Parallel Simulation (12 Month Instantaneous)

Parallel Simulation (24 Month Aged)

Dynamic Asset Cash Flow Testing

NCUA: Focused on “Stress” Testing

Instantaneous and significant changes in the level of interest rates (instantaneous rate shocks)

Substantial changes in rates over time (prolonged rate shocks) Changes in the slope and the shape of the yield curve (i.e.,

yield curve risk)

Changes in spread relationships

Enhance Investment Decisions!

• Pre-trade/What If Bond Swap Analysis Quantify how Portfolio Changes Impact Return BEFORE

trading Stand - Alone Basis Total Portfolio 12 month aged simulations +/- 300 bps TROR

Measures Risk Before and After Swap Effective Duration/WAL Sector/Credit Coupon distributions

• Measure Twice: Cut Once!

ABC Credit Union

Objective: Reduce Exposure to Declining RatesEnhance IncomeStrategy:Reduce Excess Cash ($6mm) Buy: 2MM 3Y Agency Bullet 2MM 10 Year MBS 2 MM 5Y Bank Note

Example: CU has excess liquidity- Wants to quantify how bond purchases would impact portfolio risk profile

www.balancesheetsolutions.org

Pre Trade What-If Bond Swap Analysis

www.balancesheetsolutions.org

How Does the Swap Look on a Stand-Alone Basis?

How Does the Swap Impact Portfolio Structure?

www.balancesheetsolutions.org

How Does the Swap Impact Portfolio Performance?

Swap Summary

Income Enhanced

Yield Enhanced

Duration Enhanced

Decreased Exposure to Declining Rates

Put Excess $$$ to work!

BONDEDGE(Portfolio Analytics)

ALM Z-M(Asset Liability Management)

TPG (Accounting)

Tying it all Together(Fully Integrated Accounting, FI Analytics and Credit)

Gimme Credit(Credit Analysis )

The BSS Advantage

Best-in-Class Fixed Income Risk Analytics Quantify Interest Rate Risk Quantify Credit Risk NCUA Compliance (the NCUA uses BondEdge!) Enhances Investment Decision

Pre-trade Bond Swap and What If Analysis Access to Dedicated Portfolio Analyst (Me)

A Happy Regulator is a Happy Credit Union

Thank you!