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Overview
This document applies to all releases of Eagle software V12.1, V13.1.2, and above. Version-dependent functionality is noted with the initial release(s) it became available.
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Entity Setup
Entities trading Negative/Zero Interest Rate Securities do not require any special setup. They will amortize like any other fixed income security based on the entity's Primary Amortization/Accretion Rule (3197).
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Reference Data
Storage & Configuration
Standard fixed income functionality can be used to model Negative/Zero Interest Rate Securities. Each security master file (SMF) has a single row in Data Management, with the exception of multi-leg swaps that have three rows (contract, pay leg, and receive leg).
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- Negative
- Coupon (70) =
0.00- Contractual negative interest rate loaded as a variable rate
- Coupon Type (97) =
I (Variable Rate)
- Coupon (70) =
- Zero
- Coupon (70) =
0.00 - Coupon Type (97) =
F (Fixed Rate)
- Coupon (70) =
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Trade Processing
Open
Trades are entered using the Book Trade module once the entity and reference data have been configured, just like any other fixed income security. Enter the appropriate entity, security identifier, and trade (35)/settle dates (37) and click Submit to query for the security. Right-click it and select Open > Buy or ShortSell or Open Swap Contract.
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Faulty Negative/Zero Interest Rate Security transactions can be cancelled and rebooked using the core Cancel & Rebook Trade process. The faulty position will be removed, correct information should be entered, and a new position will be established. The exception is multi-leg swaps, which must be canceled using Batch Cancel Trades. Then the trade must be reentered using Book Trade.
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Accounting
Once a Negative/Zero Interest Rate Security trade is booked it will be picked up in Eagle’s global workflow. Daily accruals (whether positive, negative, or zero) and periodic coupons are generated as part of the earnings process, Accounting valuation is calculated when posting unrealized gain/loss, and Data Management valuation is calculated in the STAR to PACE push. These can be scheduled or triggered manually.
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- The final Maturity Date (38) cash flows based on a negative interest rate depend on whether the security was held long or short (swaps only have an interest payment at maturity)
- Long: receipt of par value - disbursement of accrued interest
- Short: disbursement of par value + receipt of accrued interest
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Reporting
STAR to PACE (S2P)
Almost all reports in Eagle Accounting leverage data from Data Management, which is populated by the S2P process. This will be scheduled as part of the daily workflow, but can also be triggered manually as described in the Accounting section.
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Data Management Reporting
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OLAP reports provide the maximum level of customization, allowing any column in Data Management to be pulled into a report. These go beyond the Accounting Grid Reports because they are not limited by core queries, can support multiple sources and various types of calculations, and provide drill-down functionality based on user-defined groupings.
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Performance
The performance toolkit is preconfigured to calculate market value-based performance for Negative/Zero Interest Rate Securities using data supplied by the S2P process. Negative interest on a long position and positive interest on a short position will be appropriately reflected in performance calculations.
- Risk analysis and performance attribution analysis features are available to analyze Negative/Zero Interest Rate Security performance
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Automation
Eagle supports loading Negative/Zero Interest Rate Security SMFs and trades through standard Message Center streams. The SMF must be loaded prior to the trade (trades will not automatically spawn SMF records). Refer to Supported Generic Interfaces V17 for more information.