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  • 1

    Trading and Price Discovery

    Ray Johnson - Bloomberg

    Hubie White - City and County of San Francisco

    Guy Boccasile - City of Ontario

    Wednesday March 20th 2019

  • 2

    That depends on the type of security offered?

    Government Bonds CBBT/BVAL

    Agency Securities CBBT/TRL1/BVAL

    Corporate Bonds BMRK/TRL1/MSG1/BVAL

    Money Markets BOOM/DOCP Comps

    What is price? Which is the most relevant?

  • 3

    Government and Agency Securities:

    Government and Agencies:

    The most liquid and price

    transparent. CBBT is the best

    bid/offer from FIT. Derived from the

    vast majority of primary dealers.

  • 4

    Government Securities: CBBT – “FIT Composite”

  • 5

    Agency Securities: CBBT/TRL1/BVAL

  • 6

    Corporate Securities: Quoting Convention Spread

  • 7

    Corporate Securities: Quoting Convention “Spread”

  • 8

    Money Market: Relative Value Analysis and Benchmarking

  • 9

    Money Market: Benchmarking vs Secured O/N Financing Futures

  • 10

    Ray Johnson Fixed Income Specialist

    415 617 7014 | rjohnson3@bloomberg.net

    Bloomberg U.S. Municipal Bonds Contacts

  • 11

    The data included in these materials are for illustrative purposes only. The BLOOMBERG TERMINAL service and Bloomberg data products (the “Services”) are

    owned and distributed by Bloomberg Finance L.P. (“BFLP”) except that Bloomberg L.P. and its subsidiaries (“BLP”) distribute these products in Argentina, Australia

    and certain jurisdictions in the Pacific islands, Bermuda, China, India, Japan, Korea and New Zealand. BLP provides BFLP with global marketing and operational

    support. Certain features, functions, products and services are available only to sophisticated investors and only where permitted. BFLP, BLP and their affiliates do

    not guarantee the accuracy of prices or other information in the Services. Nothing in the Services shall constitute or be construed as an offering of financial

    instruments by BFLP, BLP or their affiliates, or as investment advice or recommendations by BFLP, BLP or their affiliates of an investment strategy or whether or not

    to “buy”, “sell” or “hold” an investment. Information available via the Services should not be considered as information sufficient upon which to base an investment

    decision. The following are trademarks and service marks of BFLP, a Delaware limited partnership, or its subsidiaries: BLOOMBERG, BLOOMBERG ANYWHERE,

    BLOOMBERG MARKETS, BLOOMBERG NEWS, BLOOMBERG PROFESSIONAL, BLOOMBERG TERMINAL and BLOOMBERG.COM. Absence of any trademark or

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  • ADVANCED SESSION OF PRE CONFERENCE:

    TRADING AND PRICE DISCOVERY

    GIOA

    MARCH 20, 2019

    Hubert R White, III CFA, CTP - Investment Officer Office of Treasurer and Tax Collector City and County of San Francisco

  • TRADING AND PRICE DISCOVERY

    Electronic Trading – Overview

     Extremely efficient for transacting liquid fixed income

    instruments such as US Treasuries, Federal Agency paper,

    commercial paper, municipal commercial paper, and

    corporate notes

     Examples of available platforms: Bloomberg FIT and BOOM,

    TradeWeb, and Market Access

     Increased market transparency

     Ease of best execution

    13

  • TRADING AND PRICE DISCOVERY

    Electronic Trading – FIT on Bloomberg 14

  • TRADING AND PRICE DISCOVERY

    Electronic Trading – FIT on Bloomberg 15

  • TRADING AND PRICE DISCOVERY

    Electronic Trading – FIT on Bloomberg 16

  • TRADING AND PRICE DISCOVERY

    Electronic Trading – BOOM on Bloomberg 17

  • TRADING AND PRICE DISCOVERY

    Electronic Trading – BOOM on Bloomberg 18

  • TRADING AND PRICE DISCOVERY

    Electronic Trading – BOLT on Bloomberg 19

  • TRADING AND PRICE DISCOVERY

    INVENTORY AND OFFER MANAGEMENT - IMGR 20

  • TRADING AND PRICE DISCOVERY

    FINRA – Financial Industry Regulatory Authority

     www.finra.org

     Dedicated to investor protection and market integrity through

    effective regulation of broker-dealers

     A not-for-profit authorized by Congress

     Great resource for market and broker-dealer information

     Has authority to fine, suspend, or bar brokers for rule

    infractions

    21

    http://www.finra.org/

  • TRADING AND PRICE DISCOVERY

    FINRA – Financial Industry Regulatory Authority

    FINRA Mission

    Writing and enforcing rules governing the activities of

    3,700 broker-dealers with 634,000 brokers

     Examining firms for compliance with those rules

     Fostering market transparency

     Educating investors

    22

  • TRADE AND PRICE DISCOVERY

    FINRA – www.finra.org, Tools & Calculators, Market Data 23

    Enter Cusip

    http://www.finra.org/

  • TRADING AND PRICE DISCOVERY

    FINRA – www.finra.org, Tools & Calculators, Market Data 24

    http://www.finra.org/

  • TRADING AND PRICE DISCOVERY

    FINRA – www.finra.org, Tools & Calculators, Market Data 25

    http://www.finra.org/

  • TRADING AND PRICE DISCOVERY

    FINRA – Price Transparency 26

  • TRADING AND PRICE DISCOVERY

    FINRA – Price Transparency 27

  • “All I bring to the party is 30 years of mistakes”

  • “Buy in haste, repent at leisure”

    The worst mistakes I’ve made in this business have been from acting too quickly.

    The point here is to try to minimize the risk of overpaying.

  • Total return approach

    Attempt to maximize the total value of the portfolio at the end of the month, year, fiscal year or whatever. Like your 401K.

    My index is the ICE BAML 1-3 year Treasury Index

    Performance not yield – do you care what your 401k yields?

    Buy bonds that go up – relatively

    Convexity – an underrated concept in the municipal arena

  • 1. I came out of the private sector and it made intuitive sense to me

    2. AND, early on I realized my competition wasn’t other public entities – it was the private sector and that’s how they did it

    3. I wanted a quantitative method to prove my worth

    Why do I do it this way?

  • Me vs the index

    Me vs the private sector

    In the last fiscal year, I beat the index by 70 bps, the private sector competition beat their indices by 27 - 32 bps. In 3 years, I beat the index by 42 bps, private sector beat the index by 16 - 28bps.. And so on

  • I want to be able to point to an unbiased, 3rd party, real dollar evaluation to show my employer how much I’m worth to them.

    I also want to be prepared if a private sector money manager comes in and pitches my city on using their services

  • My “process”

    This only applies to:

    credit and Agency paper

    New issue, “cheap” bonds, special situations

    and, when opportunities don’t exist, I don’t force it

  • I am shown a bond I’m an opportunistic investor

    I see a bond that’s on my list

    Then I start the process

  • Salesman: January 23 12.:01:39 new- $50mm C 3.05 5/20 a1/a+ offer +45 3.04 ytm. 12:01:47 bid them 3.05% Banknote

    Watch – positive

    To his credit, he knows this is the kind of bond I look at. He shows them at +45 and he knows my penchant for countering so he

    says bid him 3.05 – he’s trying to get on my good side and “anchoring” me at the same time

    It’s a big issue - liquid

  • •It’s a banknote.

    •It’s on watch positive.

    •It’s virtually a cash equivalent and I needed some short paper.

    •It’s close to being money fund eligible which will open up a new universe of buyers. So there’s a pretty decent chance that it tightens.

    •It’s big and liquid – so I can sell it if it tightens

  • Wednesday, January 23rd

    Remember he showed me this bond at 3.05

  • This is what I saw when I typed “QRD into my Bloomberg.

    I made the assumption that this was the purchase that the dealer was showing me.

  • Why/how did I make this assumption?

    1. I HADN’T SEEN THE MORE RECENT PRINTS AT +50

    2. HE HAD 50MM WHICH WOULD SEEM TO BACK UP THE BID

    3. AS AN ASIDE, A LOT OF DEALERS DON’T LIKE TO TELL YOU THEIR SIZE (UNLESS THEY’RE LYING)

    4. IT WAS CONVENIENT FOR ME AS I BASED MY BID ON WHERE I GUESSED HE OWNED THEM AND I THOUGHT THEY WERE CHEAP AT THAT LEVEL

  • Thursday, January 24. 2019

    GUY BOCCASILE

    07:52:29 C's ?

    Salesman:

    07:58:50 +47

    07:59: 3.05% wor