Skip to main content

​
What is Bond Relative Value Analysis?

Bond relative value (RV) analysis determines whether a specific bond is “cheap” or “rich” compared to similar bonds and the broader market. When you buy a bond, you earn a spread over the risk-free government yield curve — this spread compensates you for credit risk, liquidity risk, and other factors. RV analysis decomposes that spread to determine if you are being adequately compensated. The key question is: “Given this bond’s credit quality, sector, and maturity, is its spread wider (cheaper) or tighter (more expensive) than it should be?” A bond trading at a wider spread than comparable bonds may represent a buying opportunity; one trading tighter may be overpriced.

​
Command

/analyze-bond-rv <ISIN, RIC, or CUSIP> [vs benchmark]
Performs relative value analysis combining pricing analytics, yield curve context, credit spread decomposition, and rate shock scenarios.

​
Workflow

1

Price the Bond(s)

Calls bond_price to extract yield, duration, convexity, DV01, and Z-spread.
2

Get Risk-Free Yield Curve

Calls interest_rate_curve to compute G-spread (spread over government yield at matching maturity).
3

Get Credit Spread Curve

Calls credit_curve to isolate the credit component. Computes residual spread = G-spread minus credit curve spread.
4

Run Scenario Analysis

Calls yieldbook_scenario with rate shifts (-100bp to +100bp) to show P&L under different rate environments.
5

Synthesize

Presents spread decomposition, scenario P&L, and rich/cheap assessment.

​
Output

Lead with the rich/cheap assessment. Follow with spread decomposition (G-spread, credit spread, residual) and scenario tables. If a benchmark bond is provided, includes side-by-side comparison. See the Bond Relative Value skill for domain knowledge on spread frameworks and rich/cheap methodology.