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Unlocking Financial Data by Justin Pauley

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Chapter 8. Market Analysis

This chapter discusses the importance of incorporating broader market trends into your analysis. For instance, one reason the stock of a retail company looks attractive relative to a technology company’s stock is that the general market sentiment has put pressure on the broader retail sector. Although we can easily measure the market sentiment in equity markets, it is more difficult to track in less transparent markets such as high-yield bonds and corporate loans. This chapter demonstrates how to use the data collected from Markit to identify broader trends in the corporate loan market. You can alter the methods used in this chapter to analyze other markets with similar sets of data.

This chapter breaks down the Markit loan data into three sections and demonstrates different types of analysis in each section.

The first section uses the facility update information to identify trends in new issue loans over time. We can use this information to determine the count and volume of loans that have come to market monthly and their average coupon, size, and term (years until maturity). Additionally, this information informs as to sectors that are pricing wide or tight to the general market, implying their risk.

The second section uses recommended update information to identify trends in loan refinancings. Aggregated loan refinancing data shows important information such as the average number of years in maturity extensions as well as the average change in coupon. ...

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