Group Assessment
Group code: 196
Course name：Financial institutions and markets
Student name and Student ID:
Tianming Xiong 35373512
Haoyu Han 34726969
Jiaxin Liao 35366532
Xingyu Liu 34676716
Introduction：
We are team 196, consisting of students from different tutorial time. We have learned that
bond is a debt instrument issued typically by a government or a corporation to raise funds.
And the interest rate is the amount a lender charges for the use of assets expressed as a
percentage of the principal. We know that the interest rate is an important influencing
factor of present value. When interest rate goes up, the present value goes down.
Conversely, the present value will increase. We hope to find the characteristics of
different bonds through the report. We hope that through this task, we can have a better
understanding and acquaintance with bonds.
Bond Research Analysis
1. Bond Research Analysis
(1) U.S. Treasury Bond (B-T-6.500-15112026)
This is a 6.5% fixed rate medium term note of the U.S. Treasury in 2023 that falls due on
November 15, 2026. With a remaining life of approximately 1 year and 8 months, it is the
most liquid and safest debt security in the world. As a sovereign security, it is primarily
utilized as a risk-free rate benchmark in the fixed income market.
(2) Apple Corporate Bond (B-APPL-3.250-23022026)
Released in 2016, this 3.25% fixed-coupon corporate bond matures on February 23, 2026.
It is high-grade corporate credit secured by one of the globe's largest and financially
soundest technology companies. While being a corporate offering, it has excellent
secondary market liquidity and investor sentiment.
1.2 Credit Rating Comparison
Bond Moody’s S&P Description
U.S. Treasury Bond Aaa AA+ Highest sovereign credit rating, minimal risk
Apple Corporate Bond Aa1 AA+ Top-tier investment-grade corporate bond
1.3 Duration Comparison (via Bloomberg Terminal)
Bond Modified Duration（years） Macaulay Duration（years）
U.S. Treasury Bond 1.55 1.61
Apple Corporate Bond 0.92 0.96
1.5 Yield Curve Dynamics (March 2025)
Yield to Maturity (YTM) represents the internal rate of return (IRR) for a bond,
assuming it is held until maturity and all coupon and principal payments are made as
scheduled.
Example：
Parameter U.S. Treasury Bond Apple Corporate Bond
Settlement Date 2025-03-15 2025-03-15
Maturity Date 2026-11-15 2026-02-23
Coupon Rate 0.065 0.0325
Price 101.5 98.8
Redemption 100 100
Frequency 2 2
Basis 0 0
YIELD Function Example 0.055391322 0.045680904
Below is a comparison of Yield to Maturity (YTM) of U.S. Treasury Bond and Apple
Corporate Bond on three different dates in March 2025.
This trend reflects increasing expectations of policy easing by the Federal Reserve and
supports upward price momentum for bonds.
1.6 Relative Valuation (Spread to Treasury)
This chart illustrates the credit spread between the Apple Corporate Bond and the
comparable U.S. Treasury Bond on three key dates in March 2025. The spread is
calculated as the difference between the Yield to Maturity (YTM) of Apple’s bond and
the YTM of a Treasury bond with a similar maturity.
The spread is computed using the following formula:
Spread = YTM_Apple - YTM_Treasury
The tightening of the spread reflects temporary bullishness on the part of investors in
credit risk, but the slight widening towards the month's end suggests caution returning.
Risk anlysis：
We will analyze the risks of the two types of bonds from three aspects: interest rate risk,
credit risk, and liquidity risk, so as to have a risk assessment for the investment.
1. Interest Rate Risk
U.S. Treasury bonds are highly sensitive to changes in interest rates. When market
interest rates rise, the present value of Treasury bonds will decline. This is because the
yields of other bonds increase in comparison, thereby reducing the demand for Treasury
bonds.
Apple Inc. Bonds
Apple Inc. bonds also carry interest rate risk. Changes in interest rates can make new
bonds more attractive in terms of interest, leading to a decrease in the market price of
Apple Inc. bonds.
2. Credit Risk
U.S. Treasury bonds are generally considered to have no credit risk, mainly because the
government fully guarantees the redemption of the bonds.
Apple Inc. Bonds
Apple Inc. bonds have a higher credit risk. If the company's business conditions change,
it may be unable to repay investors' bonds, resulting in losses.
3. Liquidity Risk
U.S. Treasury bonds have very strong liquidity. Many investors prefer to hold U.S.
Treasury bonds, so the liquidity risk is relatively low.
Apple Inc. bonds have a relatively higher liquidity risk. When market confidence drops
or the company has negative news, the liquidity risk will significantly increase.
Overall, US Treasury bonds carry a higher interest rate risk, while Apple's bonds have
greater credit and liquidity risks. Higher risks may imply potentially higher returns, but
one should also consider their risk tolerance.
Trading background and strategy：
[Link] first one is market background:
The annual inflation rate in the US eased to 2.8% in February 2025 from 3% in January,
below forecasts of 2.9%.（Trading Economics，2025）
The Federal Reserve paused rate cuts, signaling that the economy may be entering a
recovery phase.
[Link] Strategy and Planing:
Based on Federal Reserve policy expectations and bond market analysis, adopt a
defensive investment strategy to aviod fluctuations in the rate market.
We decide to buy 20 units of Apple bonds (B-APPL-3.250-23022026) and 10 units of
Treasury bonds (interest rate 6.500%).
We plan to hold until March 27, 2025, to avoid the interest rate risk caused by the
Federal Reserve's interest rate hike.
[Link] execution
Summary of Transaction:
Buy: 20 units of Apple bonds (3.25%) and 10 units of Treasury bonds (6.500%).
Sell: Sell all by March 27, 2025.
Key Risks:
It is important to ignore the main interest rate risk:
One is the rising market interest rates cause bond prices to fall.
Second is liquidity risk: Long-term bonds are difficult to liquidate when markets fluctuate.
Performance review for thess two bonds
Income situation:
The total loss was about 4 percent (Apple bonds lost 1 percent, Treasury bonds lost 2
percent).
We think to mange risk and ingoremain risk :
Timely selling hedges against potential losses from Fed rate hikes.
Apple bond credit risk is low, but the operation pressure of the enterprise still needs to be
paid attention to.
Direction of improvement in the future:
In the future, the yield of the bond market can be increased by purchasing diversified
financial products to match the characteristics of bond financial products. For example,
70% of the funds are used to buy bonds, and the remaining 30% are used to buy short-
term foreign exchange bonds with high interest rates.
Closer tracking of macroeconomic data and policy developments.
The finanly point for these two bonds ：
The transaction was based on Fed policy expectations and bond market analysis, but
failed to realize the expected gains. In the future, attention should be paid to
diversification strategies and macroeconomic research to improve trading precision.
Inconclusion：
Through this assignment, we learned that teamwork is important. What’s more, trading
on the exchange is subject to waiting, it won’t take effect immediately. And we know that
different bonds have different characteristics. Through the analysis of the two bond
issuers、credit ratings、coupon rates、duration、yield curve dynamics and market
environment, it is found that government bonds have lower risks, while Apple bonds
show higher market sensitivity. U.S. Treasury Bonds are highly sensitive to changes in
interest rates, and its credit risk is very low because they are backed by the government.
Apple Bonds carry higher credit risk compared to Treasuries because they depend on the
company’s financial health. Our group’s investment strategy aims for stability, and we
are willing to accept moderate.
For AI tool using: Originally, each team member wrote the initial article according to
their own ideas. Then when we merged it we realized it was a concise report. So we
distilled our ideas through AI and reformatted them.
Appendix：
Trade history：
Trans Ex F Cu Sec
actio cha Qu X rre urity Pri Am Create
Symbol
nTyp Company ng ant Ra nc Typ ce ount Date
Symbol e Name e ity te y e
B-T- T-BOND $1, B-T-
$10, 03/27/
6.500- Mark 6.500% US Bon 00 6.500-
323. 2025 -
1511202 et - 15-Nov- - D ds 9.3 1511202
48 01:28
6 Sell 2026 US 10 1 8 7
B- B-
APPL- $9 $19, 03/27/ APPL-
US Bon
3.250- Mark Apple Inc - 91. 879. 2025 - 3.250-
D ds
2302202 et - 3.250% - - 38 24 01:27 2302202
6 Sell Feb 2026 US 20 1 7
B-T- T-BOND $1, B-T-
($10 03/26/
6.500- Mark 6.500% US Bon 00 6.500-
,297 2025 -
1511202 et - 15-Nov- D ds 6.9 1511202
.10) 00:30
6 Buy 2026 US 10 1 2 7
B- B-
APPL- $9 ($19 03/26/ APPL-
US Bon
3.250- Mark Apple Inc - 90. ,867 2025 - 3.250-
D ds
2302202 et - 3.250% - 87 .30) 00:30 2302202
6 Buy Feb 2026 US 20 1 7
Trade note：
OrderSide NoteCreateDate Note
Buy 3/25/2025 [Link] AM I think it has a positive future.
Higher interest rates are expected to cause
3/26/2025 [Link]
Sell bond prices to fall and bond rates to rise.
AM
Close the position and stop the loss.
I buy this because I think it is a leader in
Buy 3/25/2025 [Link] AM
this field.
Higher interest rates are expected to cause
3/2 6/2025 [Link]
Sell bond prices to fall and bond rates to rise.
AM
Close the position and stop the loss.
References：
1. Bloomberg L.P. (2025). *Market yield data and bond duration analytics*. Retrieved March
30, 2025, from Bloomberg Terminal.
2. Federal Reserve Board. (2025, March). *Federal Open Market Committee (FOMC) statement
and projections*. [Link]
3. Moody’s Investors Service. (2025). *Issuer credit ratings: United States and Apple Inc.*
[Link]
4. S&P Global Ratings. (2025). *Corporate credit ratings database: Apple Inc.*
[Link]
5. U.S. Bureau of Labor Statistics. (2025, March). *Consumer Price Index Summary – March
2025*. [Link]
6. CME Group. (2025). *FedWatch Tool: Interest rate probabilities*.
[Link]
7. Trading Economics (2025). United States Inflation Rate. [online] Trading Economics.
Available at: [Link]
