Manage ILBs in Issue Viewer

Inflation Linked Bonds (ILBs), also known as TIPS, real return bonds, treasury gilts, treasury stocks, and generic inflation indexed bonds and linkers, are debt instruments whose principal and subsequent interest payments are adjusted based on the rise of inflation. ILBs follow a trailing three month index. They are adjusted based on changes in the CPI-U (consumer price index for all urban consumers) with a three month lag. The actual index used in all calculations is published three months prior, and is referred to as the CPI (consumer price index). For more information, see Understand Inflation Linked Bonds.

To set up an ILB security, you must first add the CPI index security. That is, the underlying index security used to measure the inflation component of the security. For more information, see Add the CPI Index Record.

After adding the underlying index, add the security master record for the ILB. In Issue Viewer, you use the Add Long Term Debt panel. The underlying index is stored with the Underlying Information group of fields on the Add Long Term Debt panel. Every ILB security has a Dated Date CPI. This is the initial value against which all future index calculations are made and it remains constant throughout the life of the security. The system supports different inflationary income calculation methods of ILBs. The ILB Calculation Type identifies which calculation method to use when calculating the Daily CPI and Daily ILB index ratio.

You must add the monthly CPI index rates in the Variable Rate table to correctly calculate ILB index ratios as of the settlement date of each transaction. The system requires enough future data to calculate the daily ILB index ratio for each day's earnings. In the case of as of transactions, the system automatically runs earnings up to the post date of the trade. Therefore, you must have CPI index rates in the Variable Rate table to prevent the failure of earnings. For more information, see Add Monthly CPI Index Rates.

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Add ILB Securities

After adding the underlying index, add the ILB security using the Add Long Term Debt panel. The underlying index security information is stored with the Underlying Information group of fields on the Add Long Term Debt panel.

To add the ILB security:

In Accounting Center, in the left navigation pane, click Setup > Securities > Manage Securities > Issue Viewer.
You see the Issue Viewer tool.
Click the Add arrow.
Point to Fixed Income and click Long Term Debt.
You see the Long Term Debt panel.
Complete the options on the Long Term Debt panel.
The system uses the value in the Processing Security Type field on the Long Term Debt panel to identify the type of long term debt instrument you are adding. To add an ILB security, select DBFLTP (Inflation Linked Debt Security). Additionally, select Fixed from the Coupon Type Code drop down list. The coupon rate does not change through the life of an ILB security.
When you select DBFLTP, the system displays additional fields that allow you to enter the underlying index information. Add the underlying index security information in the Underlying Security ID, Underlying Issue Name, Underlying Type, Dated Date CPI, ILB Index Precision, ILB Deflation Protected Maturity, and ILB Calculation Type fields. Eagle supports different inflationary income calculation methods for ILBs, as specified in the ILB Calculation Type field. The dynamic lookup for this field returns all values in the ILB CALC TYPE code category.
Click Submit.

Long Term Debt Panel - ILB Options

The following are the key options for an ILB security. See the Long Term Debt Panel Options page for more information about the Long Term Debt panel. Note options may vary according to your selections.

Option	Tag	Description
Long Term Debt Details
Investment Type	11	Displays the investment type, such as FI (fixed income).
Processing Security Type	3931	Specifies the code value that the system uses to identify the type of long term debt instrument you are adding. An inflation linked bond must be set up with a processing security type of DBFLTP (Inflation Linked Debt Instrument). The system requires that you populate the underlying index with the index that the security marks to market for inflation, and also requires a dated date CPI (consumer price index) as part of the security master record setup.
Long Term Debt Coupon Periods
Coupon	70	Specifies the rate at which the security accrues interest. It is expressed as an accrual rate. A value of zero is required for zero coupon bonds.
Coupon Type Code	97	Indicates the type of coupon associated with the security. Options include: Variable Rate. The security has fixed coupon dates and uses a variable rate based on the security identifier to calculate the coupon for use in earnings. You must enter the rate in the Variable Rate table. Step Rate. The security has fixed coupon dates and uses a variable rate based on the security identifier to calculate the coupon for use in earnings. You must enter the rate in the Variable Rate table. The system recognizes this option as a step bond (also called a step coupon bond, step up bond, or step down bond). Fixed Rate. The security has fixed coupon dates and has a fixed coupon rate to calculate the coupon for use in earnings. Unscheduled Variable Rate. The security has unscheduled payments and accrues interest based on a rate you enter in the Variable Rate table.
Underlying Information
Underlying Security ID	1348	Specifies the underlying index that an inflation bond security measures inflationary adjustments against.
Underlying Issue Name	1141	Specifies the name of the underlying index that an inflation bond security measures inflationary adjustments against.
Underlying Ticker	1349	Specifies the ticker of the underlying index.
Underlying Type	916	Specifies the type of underlying index. Options include: Cheapest to Deliver Fixed Leg Float Leg Index Loan Pay Fixed Pay Float Primary Received Fixed
Dated Date CPI	1550	Specifies the value of the index that is used to measure inflation of an inflation bond security, as of the dated date of the security. It is used as a base line to measure inflation adjustment to the bond.
ILB Calculation Type	11808	Identifies which calculation method to use when calculating the Daily CPI and the Daily ILB Index Ratio. The dynamic lookup for this field returns all values in the ILB CALC TYPE code category. Eagle Accounting provides a complete list of code value ILB calculation types as part of the install/upgrade process. Options include: 30E_3M. Sweden 30_1M. Iceland ACT_3J. Japanese ACT_3M. USCanadian ACT_4M. South Africa AVG_6M. New Zealand (Average CPI Values) AVG_GT1_6M. Australian (Ave change) IDX_6M. New Zealand (Actual CPI Values) IDX_GT1_6M. Australian (Actual CPI Values) NONE_8M. UK Index-Linked Gilts RATIOS. User Provided. Used if Eagle's accounting solution does not provide an appropriate method to calculate the Daily Reference CPI and the Daily Index Ratio. If you select this option, you must directly input the index ratio for every day accruals are processed on the underlying index. For example, the ILB is issued by a country for which no ILB calculation type is available. RATIOS_SD. User-Provided (same-day earnings ratio). Used if Eagle's accounting solution does not provide an appropriate method to calculate the Daily Reference CPI and the Daily Index Ratio and you need to provide the current day's index ratio for earnings rather than the next day's index ratio. If you select this option, you must directly input the index ratio for every day accruals are processed on the underlying index. For example, used for Australian ILBs affected by the Australian Bureau of statistics re-basing date of October 24, 2012.
ILB Index Precision	11017	Determines the decimal precision calculation of the ILB index ratio. The system supports a calculation of 12 places to the right of the decimal.
ILB Deflation Protected Maturity	11809	Determines if the security has the initial principal investment protected at the time of maturity. Options include: Yes. The system safeguards against deflation by guaranteeing that the principal payment at maturity is never less than the initial principal at issuance of the security. That is, par value. No. The system does not safeguard against deflation at the time of the maturity transaction. This means that the system creates a maturity transaction using the value of the ILB index ratio at the time of maturity, even if the ILB index ratio is less than 1.
ILB Min Index Ratio	3854	Specifies the guaranteed minimum ILB index ratio at maturity.