Bond Interest Coupon Rate.

[aviator]

Hi Mark,

I have quite a few corporate and municipal bonds, and I have a question about how to enter the coupon rate (Investment Properties, Income tab, Coupon Rate (%)). How does FM expect this number to be entered? If a bond pays a coupon rate of 2.125 percent, I've entered 2.125 in the Coupon Rate % field. However, this produces wacky numbers in the Projected Annual Income field (it appears that FM is simply multiplying the End shares by 2.125, not .02125).

Here's an example:
Bond: US Bancorp medium term note.
Under the Income tab of the investment's properties, I have the following information entered:
Style: Bond Interest
Maturity Date: 2/15/2013
Coupon Rate: 2.125
Payment Frequency: Twice a year
Day Count Basis: US(NASD) 30/360

I run a custom report that shows projected annual income. In this case, the projected annual income for US Bancorp is showing $159,375. The end shares are 75,000; end value is $75,083.75. Something is wrong (projected annual income is way too high for this bond), but I'm not sure if it's something I've entered or possible a bug.

Thanks in advance for looking into this.

[Mark]

Hi aviator,

Fund Manager does expect the coupon rate to be entered as a percentage (2.125, not 0.02125). The problem is with your shares. For bonds, Fund Manager expects your share quantity to be 1/100th the face value, and the price is near 100, so the valuation comes out correct. So, in this case you would want to have purchased 750 shares at a price near 100, so the valuation is still 75,000. For some more information on this, please see:

http://fundmanagersoftware.com/help/bond_tips.html

[aviator]

Hi Mark,

Thanks for your answer. The problem is that my brokerage firm lists (and downloads) shares in thousands (for example, 75000 shares), and prices in dollars (priced at $1.01445). I can easily change this to 750 shares at $101.445/share, but my concern is what will happen when they sell a portion of a bond. That transaction will most likely be downloaded as thousands of shares, not hundreds. Going forward, I'd prefer not to have to change transactions manually. Any thoughts on how to do this?

[Mark]

Hi aviator,

Are you retrieving from your broker, or downloading in some other format and then importing? If you're retrieving, and the broker is reporting the security as a bond type investment, Fund Manager should automatically be correcting the share quantity.

[aviator]

Hi Mark,

I'm downloading directly from my broker, using the Retrieve Transactions... from within Fund Manager.

Here's whats interesting: This is a fairly new account. On my initial download, all the securities were set up in Fund Manager, including the initial purchase of bonds. (I can't remember if they came in as Bonds, or if I had to change the investment properties to Bonds). In the case of US Bancorp, it was downloaded as 100,000 shares. Later, the brokerage sold a quarter of those shares. That transaction was recorded in FM as a redemption of 25,000 shares.

As this is a new account, I don't mind going in and changing all the existing transactions (dividing shares by 100 and multiplying price by 100). If I do this, will FM somehow "know" how to handle future transactions even if they get downloaded in the same format as the broker?

[Mark]

Hi aviator,

I think we should check and see how your broker is reporting these transactions. If you turn on logging, and go look in the xmldump.txt file (or you can email it to me, and I'll look), you can see all your transactions. There are different types of transactions, and if the bond transactions are being reported as BUYDEBT or SELLDEBT, then the share quantity will be handled properly (divided by 100) automatically by Fund Manager.

If for some reason your broker is reporting these transactions as buy/sell of stock, instead of debt, then the share quantity adjustment won't happen.

To test this, you can do a retrieve for all dates, and then just cancel at the preview transactions dialog.

To enable logging, turn ON the option "Options / General Preferences... / Other / Create Log Files When Importing Transactions". After a retrieve the log files will be located here:

Windows XP and earlier:
C:\Documents and Settings\<username>\Application Data\Fund Manager

Windows Vista and 7:
C:\Users\<username>\AppData\Roaming\Fund Manager

[aviator]

Hi Mark,

OK, I did as you asked and the xmldump.txt file does indeed contain BUYDEBT for the initial purchases. But the UNITS, which I'm presuming to be the number of shares, is being downloaded as thousands (i.e. 100,000). And the UNITPRICE, which I'm presuming to be the share price, is being downloaded in hundreds of dollars (i.e. 114.021).

[Mark]

Hi aviator,

If the log file is showing a BUYDEBT for 100,000 units at a price of 114, this transaction should import and show up in the Preview Importing Transactions dialog as a buy of 1,000 shares at a price of 114. Is it not doing this? Are you using version 11.8?

[aviator]

Hi Mark,

No, the 100,000 shares came in at 10,000 (not 1,000) shares, and the price came in at 1.14021.

I'm on version 11.8, transaction module 158.

Since something is clearly wrong, I'm going to create a separate sub-account and download all transactions since the beginning of this accounts history. I'll let you know what I find.

[aviator]

Hi Mark,

OK, here's some data that might help. This is a partial screen print from the xmldump.txt file. Note that in this file the UNITS are 2,500,000 and the price is $105.328461. (I've redacted the account number for privacy reasons.)

xmldump.png (11.93 KiB) Viewed 5922 times

And here is the Preview Importing Transactions screen which shows the Shares reduced to 25,000 and the price $1.05328

Preview Importing Transactions.png (12.07 KiB) Viewed 5922 times

[Mark]

Hi aviator,

Thanks, that helps. FM is dividing the shares by 100 as it normally does for a BUYDEBT. However, it looks like in this case the units are being reported 100 times face value. FM is expecting the units to be just the face value. I would have expected the units to have shown at 25,000 and not 2,500,000.

The way we would want this transaction recorded in FM is 250 shares at a price of 105.

Do you have other BUYDEBT or SELLDEBT transactions? Are they all for US Treasury Notes? Do they all have the units reported at 100 times the face value? Which broker are you retrieving this from? I'm wondering if this problem is specific to US Treasury Notes, this broker, or both...

[aviator]

Hi Mark,

Given that this problem is pervasive with all my bonds from this broker, my guess is that it's not limited to US Treasury notes. But instead of guessing I'll dig further first thing tomorrow and provide data to you including, hopefully, answers to your questions.

Thanks,

[aviator]

Hi Mark,

I've sent you a PM that hopefully answers your questions.

Thanks.

[Mark]

Hi aviator,

Okay, thanks. I'll reply via PM then. If you'd like to share my answer, then you can post it back here.