How Bond Desks Use Metrics and Indicative Quotes

Summary

The note distinguishes broad bond performance measures from the word “indicative” as used on a trading floor. Price, yield, spread measures such as Z-spread and option-adjusted spread, and horizon return are listed as price or return metrics. Such measures describe or summarize aspects of a bond, but their precise meaning depends on the analytical or trading context in which they are used.

“Indicative” is described primarily as a quote status: an indicative bid or offer signals an approximate price for discussion, rather than a firm commitment to trade. The discussion is limited to a short terminology clarification and does not define mortgage-backed-security measures such as prepayment rates, duration, or DV01, despite the question's desk context. It offers no pricing method, empirical evidence, or guidance on when each metric should be preferred, so terminology should be interpreted in its specific market or workflow context.

Key ideas

• Bond metrics can refer to measures such as price, yield, spread, or horizon return.
• The meaning of a metric depends on the context in which traders or analysts use it.
• An indicative quote is an approximate, non-firm price indication.
• The explanation does not cover specialized mortgage-backed-security measures.

Tags

# what do metrics and indicators mean in the finance context? Like trading of MBS products


# what do metrics and indicators mean in the finance context? Like trading of MBS products












it's often heard in my daily work as a programmer in an investment bank, supporting mortgage backed securities desks (passthrough, agency cmo, cmbs, etc).

My take is that the terms describe the characteristics of the instruments. Is it used in more specific scope? For example, can we call price, coupon rate, duration, DV01, OAS "metrics" or "indicatives" of a bond? and what about those more specific to MBS products such as "prepayment rate"?

## Answer by toing (score 1)

https://quant.stackexchange.com/a/60824

These are always used in a context and their meaning can change based on specific context. Broadly speaking and in market lingo:

- Price/Return metrics: price, yield, Z spread, OAS, N Spread, Horizon return





On a trading floor, i have always heard, "indicative" in terms of indicative quote. That is, a client is asking for a price quote as an indication and not as a firm bid.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.