Example reference data screens and fixed leg accrued interest calculations are attached:

Entity Setup

Before any trades can be booked, the target entity must be set up appropriately. Refer to Swaps Entity Setup Processing Notes for details.

Reference Data

Storage & Configuration

Eagle models TRS security master files (SMFs) as three rows in Data Management, each with its own Security Alias (10), linked by a common Primary Asset ID (14). Eagle Accounting must be set up to allow duplicate IDs for swaps by following the steps in Allow Duplicate Cross Reference Identifiers Processing Notes.

Refer to Multi-Leg SWAPIDs Processing Notes for information about the unique SWAPID identifiers that are automatically created for the contract and each leg of a multi-leg swap.

Market Data

ZCIS are typically priced dirty in the market. To prevent any double-counting during valuation, inflation income must be turned off in Eagle Accounting. This is accomplished by setting both legs to be interest accrual legs, rather than one inflation leg and one interest accrual leg. As a result, you do not need to load any inflation index values for this security.

The interest accrual leg of an ZCIS uses either a fixed or floating rate. If you are using an all-in dirty price (inclusive of both inflation and interest), accruals should be turned off for both legs. This can be done by setting a fixed rate coupon of zero or using Debt Default Periods as described in Manage Debt Default Periods. If you are using a dirty price that only includes inflation, you can accrue the fixed or floating interest in Eagle Accounting. For floating legs, the underlying floating rate index must be set up using Reference Data Center (RDC) or Issue Viewer. Other than identifiers, the only required information is the currency.

Once the index has been setup, floating rates can be loaded using Add Variable Rate. Eagle Accounting will automatically pull the appropriate rates into the accrual process based on the floating leg's First Rate Reset Date (10911), Reset Frequency (1788), and Reset Look-Back Days (10547).

• Interest rates must be loaded to the underlying index back to Dated Date (or previous coupon date if swap is traded off-cycle) and each subsequent coupon date minus Reset Look-Back Days

Security Data

ZCIS can be set up and maintained in RDC or Issue Viewer. Most data is entered on the contract and propagated to the legs. Specific reset and accrual conventions are entered separately on each leg.

Contract

• Issue Name (961)

• Primary Asset ID (14) & Type (1432): ensure duplicate IDs are allowed (see Storage & Configuration section above)

• Processing Security Type (3931) = SWCOIF (Inflation Linked Swap Contract)

• Price Multiplier (18): the default of 0.01 will be correct in most cases, but may need to be changed to 1.00 (ZCIS prices are sometimes supplied having already been multiplied by 0.01)

• Issue Country (1418)

• Asset Currency (85)

• Cleared Security (5027) = null or No

  • If you trade cleared ZCIS, please contact Instrument Engineering

• Issue Date (68): first trade date of the swap

• Dated Date (1183): date accruals start, "Effective Date" in ISDA contracts

• Maturity Date (38): date swap expires, "Expiration Date" or "Termination Date" in ISDA contracts

Legs

The "Interest Leg" values should only be used if you are accruing in Eagle or are using Debt Default Periods to suppress accruals (as described in Manage Debt Default Periods), otherwise both legs should use the "Inflation Leg" values. An overlay can be applied to Create Security Debt Default Periods Automatically during security creation.

• Processing Security Type (3931) = SWLEAC (Swap Leg Interest Accrual)

  • This should be used for both legs

  • Do not use SWLEIF (Swap Leg Inflation Linked Interest Accrual)

• Coupon (70)

  • Inflation Leg: 0

  • Interest Leg: enter stated rate for fixed leg and zero for floating/variable rate legs to indicate that actual rates must be viewed from VARIABLE_RATE table

• Coupon Type (97)

  • Inflation Leg: F (Fixed Rate)

  • Interest Leg: F (Fixed Rate) or X (Floating Rate)

• Day Count Basis (471)

  • Inflation Leg: ACT/360

  • Interest Leg: as specified in contract

    • 1/1 translates to NL/365 in Eagle Accounting

• Payment Frequency (472)

  • Inflation Leg: MAT (At Maturity)

  • Interest Leg: as specified in contract; often MAT (At Maturity) for ZCIS

• Business Day Convention (1536)

  • Inflation Leg: NONE

  • Interest Leg: typically Modified Following, which is ADJMBC (Modified Following - Adjusted)

    • Set to NONE if Payment Frequency = MAT (At Maturity)

    • The following fields are conditionally required if Business Day Convention != NULL or NONE

      • Coupon Day of Month (10551): day of the month that payments are scheduled to be made, which will be automatically adjusted based on the Business Day Convention

      • Business Calendar (1480): as specified in the contract; a composite calendar (including dates from two different calendars) may need to be setup in some cases

• First (473) & Last Payment Date (474)

  • Inflation Leg: set to Maturity Date

  • Interest Leg

    • Set to Maturity Date if Payment Frequency = MAT (At Maturity)

    • For any other Payment Frequency, set to actual first and last payment dates, including any adjustments for weekends/holidays

• Floating Rate Fields (only applicable to the Interest Leg): refer to Interest Rate Swaps (IRS) Best Practices for details