Converting Bond Quotes to Percent of Par Across Markets
Summary
The document explains why a bond's quoted price cannot always be converted to a percentage of par using a universal face value. Many markets quote bonds as a percentage of par, but some use a different quote basis. To convert a quote, identify the par value convention for that instrument and compare the traded price with that basis; the example contrasts Brazilian and Mexican conventions.
It also flags adjustments that can be embedded in quoted prices. Brazilian coupon bond prices may be dirty prices that include accrued interest, and prices for some Brazilian inflation-linked bonds include an inflation index adjustment. Bloomberg fields can indicate whether a bond is quoted as a percentage of par and, otherwise, provide the par value used for quotes. These conventions vary by market and instrument, so a simple formula is only valid once the quote basis and included adjustments are known.
Key ideas
- Bond quote conventions differ across markets, so the relevant par value must be identified before conversion.
- A quote of 95 against a par basis of 1,000 represents 95% of par.
- Some Brazilian coupon bond quotes include accrued interest rather than reporting a clean price.
- Certain inflation-linked bond quotes also incorporate an index adjustment.
Tags
Full text
# Bond's price expressed as a % of par # Bond's price expressed as a % of par the following is causing a bit of confusion... In some countries, e.g. Brazil, I saw the bonds are quoted in "Unitary prices" (PU). If we pick an example where: ``` Unitary price = 10,400 (Market price) Par value = 1,000 ``` What is the math behind to convert the market price to a "% of par price"? I saw Anbima, the main brazilian exchange, quotes price as 10,400; while some brokers as say 1,040 (which would be the price as "% of par"). Is it accurate to say the below? Price as % of par = (Traded price / Par value) * 100 ## Answer by Dimitri Vulis (score 4, accepted) https://quant.stackexchange.com/a/61808 Bond price quoting conventions differ in different countries... In the vast majority of markets, they are quoted as percentage of par. But there are a few exceptions. If you're looking at Brazil LTN's (BLTN on Bloomberg) or NTN-F's, for example, 1,000 is the par price, so 950 quote means 95% of par. If you're looking at Mexican cete's (MCET on Bloomberg), 10 is the par price, so 9.5 quote means 95% of par. On Bloomberg, there is a yes/no field saying whether this bond is quoted as percentage of par. If it is false, then another field contains the par value used for quotes. Also, in Brazil, coupon bond prices are quoted dirty (with accrued), not clean (without accrued), like in most markets. But, as they say in TV infomercials, that's not all! If you're looking at inflation-linked Brazil bonds like NTN-B's or (rarely seen these days) NTN-C's, then the P.U. also includes the inflation index adjustment. (Israeli inflation-linked bonds are also quoted this way - I'm not sure if all or some.)
Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.