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CTM PORTFOLIO MANAGEMENT GAME PAGE 1 WELCOME TO THE CTM PORTFOLIO MANAGEMENT GAME The portfolio management game is designed to reinforce the concepts covered in the lectures and case studies to help you understand how a Corporate Treasury manages debt and other exposures. Participants are grouped into teams. Each team plays the role of the Corporate Treasury. At the start of the game each team has identical exposures. Teams will make their own decisions on how to manage these exposures and any new exposures which arise during the game. The game is played in a series of decision sessions. During each session the team analyses its cash flows, reviews its exposures, past performance, current market rates and data on future economic conditions and decides which transactions to undertake. OBJECTIVE You are the Corporate Treasury for a number of government clients. In this game you have three clients: Queensland Electro Power Authority (QEPA), A Port Authority (APA) and Local Government (LG). They each have funding requirements and other exposures that they look to you to manage. Your task is to provide funding for your clients and actively manage their financial market risk exposures with the aim of providing the lowest possible cost relative to established benchmarks and within certain constraints. CENTRAL TREASURY PROFILE BACKGROUND Central Treasury is the corporate treasury for a number of government clients. It operates as a ‘not for profit’ treasury. Central Treasury’s core business is liability management. However, it also provides the full range of treasury services including hedging foreign exchange and commodities exposures. In its liability management activities, Central Treasury accesses financial markets to obtain funds for its clients. There is not a one to one link between the funds raised and the funds lent to clients. All funds are pooled to form a Portfolio and clients’ requirements are funded from the Portfolio. The benchmark for the funding portfolio has been designed to match the requirements of the customers’ loans it is funding. The funding cost generated by the Portfolio is passed on to the clients at zero spread. Funding costs (market value interest costs) are charged according to the proportion of each client’s loan from the Portfolio. Hedging of foreign currency and commodity exposures are kept separate from the Portfolio to ensure clients of the Portfolio do not cross-subsidise these activities. CTM PORTFOLIO MANAGEMENT GAME PAGE 2 OPERATIONAL STRUCTURE To accommodate the separation of its core business activities and the other treasury activities, the Central Treasury operates two cost centres, one for Portfolio management (Portfolio) and the other for general administration (Central Treasury). The Portfolio cost centre is used for all transactions relating to the raising and funding of clients’ debt. Foreign currency and commodity exposures are excluded from the Portfolio cost centre. Clients requesting hedging of their foreign currency and commodities exposures are charged the cost to the Central Treasury. Funds required to pay for hedges or purchases on foreign exchange come directly from the client and are not required to be funded through the Portfolio. Transactions recorded in the Central Treasury cost centre include: Commodities/foreign exchange Operating expenses, and Penalties incurred by the portfolio manager resulting from poor management. ADMINISTRATION/OPERATING EXPENSES Clients pay an administration fee of 50 basis points per annum based on the amount of debt outstanding at the beginning of the quarter. This fee is calculated using the actual days in the quarter. The Central Treasury administration fee is accrued throughout the quarter and is funded through the Portfolio at the time it is due to be paid to the Central Treasury. The administration fee is paid to the Central Treasury on the first day of the subsequent quarter. Central Treasury’s operating expenses are 30 basis points per annum based on the amount of debt outstanding at the beginning of the quarter. They are incurred by the Central Treasury and not by the Portfolio. The Central Treasury pays operating expenses at the end of each quarter. Operating expenses have no impact on the Portfolio bank account. OPENING POSITION It is assumed the Central Treasury has just opened its doors for business. This means all cashflows, with the exception of your clients’ funding requirements, will have already been incorporated into the opening position. GAME RULES You must ensure that your clients’ funding needs are met at all times. You may raise new funds at anytime. If you have borrowed more than your clients require you may invest the surplus funds in three month commercial paper or you can retire debt by buying back bonds which you have issued at the then market price (you cannot buy back more than you have issued in any bond). BORROWING FACILITIES You can raise funds through any of the following facilities: Commercial Paper Facility CP3M Borrowing – Commercial Paper Facility 3 month Bank Bill CTM PORTFOLIO MANAGEMENT GAME PAGE 3 Domestic Bond Facility DB05 Domestic Bond – 1 year A$ bonds maturing 15 March 2005 5.70% Coupon DB07 Domestic Bond – 3 years A$ bonds maturing 15 March 2007 5.75% Coupon DB09 Domestic Bond – 5 years A$ bonds maturing 15 March 2009 5.79% Coupon DB14 Domestic Bond – 10 years A$ bonds maturing 15 March 2014 5.87% Coupon Eurobond Facility US07 Eurobond Program – 3 years US$ bonds maturing 15 March 2007 2.00% Coupon US14 Eurobond Program – 10 years US$ bonds maturing 15 March 2014 4.50% Coupon EUR09 Eurobond Program – 5 years EUR bonds maturing 15 March 2009 3.50% Coupon Note: 1. You must have a minimum of 15 per cent exposure in each facility class. 2. All foreign currency denominated bonds must be swapped into floating (three monthly resets) on drawdown. ADDITIONAL PORTFOLIO MANAGEMENT FACILITIES Cross Currency Swaps CCSUS07 Cross Currency Swap for US$ bonds maturing 15 March 2007 2.00% Coupon CCSUS14 Cross Currency Swap for US$ bonds maturing 15 March 2014 4.50% Coupon CCSEUR09 Cross Currency Swap for EUR bonds maturing 15 March 2009 3.50% Coupon Interest Rate Swaps IRSDB07 Interest Rate Swap for A$ bonds maturing 15 June 2007 5.75% Coupon IRSDB09 Interest Rate Swap for A$ bonds maturing 15 June 2009 5.79% Coupon IRSDB14 Interest Rate Swap for A$ bonds maturing 15 June 2014 5.87% Coupon Interest Rate Futures FUT3YR 3 Year Generic Bond Futures Contract 6.00% Coupon FUT10YR 10 Year Generic Bond Futures Contract 6.00% Coupon Futures Contract Information 1. The contract size for both the three year and 10 year contract is $100 000. 2. Contracts expire three months from the respective decision making points and a new contract will apply from that point. 3. Deposit margins of $700 per three year contract and $2000 per 10 year contract apply. No span margin calculations apply. Deposit margins must be funded for by the Portfolio at the time of the deal and will earn the Portfolio interest at the three month commercial paper rate. 4. Variation margins are to be paid upon the expiry of the contract. That is, at the next decision making point after the futures are traded. 5. Brokerage applies at a rate of $5.00 per contract. This is also to be funded through the Portfolio at the expiration of the contract. 6. The maximum number of contracts for the three year and 10 year futures is 5000 contracts each. CTM PORTFOLIO MANAGEMENT GAME PAGE 4 INVESTMENT FACILITIES INVCP3M Investment – Commercial Paper Facility 3 month Bank Bill Surplus cash can be invested in three month commercial paper or used to buy back bonds you have issued. When investing in three month commercial paper you must decide which counterparty to deal with. Details of the counterparties available are as follows: Counterparty Credit Rating Coolum Treasury Corporation AAA First Mudjimba Bank AA Peregian Trust Bank A- Bli Bli Corporation Ltd A- Each counterparty issues its commercial paper at a yield reflecting their current credit rating and amount they have on issue. The investment yield for each counterparty is available on the rate sheet provided each quarter. The face value of the total investments in three month commercial paper cannot, at any one time, exceed $500 000 000. Further, there are limitations as to how the investments can be allocated across the counterparties: Counterparty Minimum Percentage of Total Face Value of Investments Maximum Percentage of Total Face Value of Investments Coolum Treasury Corporation 40% 100% First Mudjimba Bank 0% 60% Peregian Trust Bank 0% 40% Bli Bli Corporation Ltd 0% 40% BENCHMARK The modified duration of your benchmark portfolio at the start of the game is 3.75 years. The composition of the benchmark portfolio will change at the start of each quarter, rebalancing the modified duration to 3.75 years, taking into account the yields at that time. The initial benchmark portfolio comprises: Instrument Weight CP3M 20.0% DB05 12.5% DB07 17.5% DB09 20.0% DB14 30.0% You have discretion to manage duration to benchmark +/- 1.0 year. CTM PORTFOLIO MANAGEMENT GAME PAGE 5 You can change the duration of your portfolio by varying either: (i) the amounts drawn down under each program (ii) the use of swaps and futures (iii) the use of physical bonds. FOREIGN CURRENCY/COMMODITIES You are also required to manage commodity price risk and foreign exchange rate risk for your clients if they have any in the coming four quarters. This is done on a back to back basis, where contracts are executed for a specific customer. These transactions do not form part of the Portfolio. You may be hedged or unhedged up to 100 per cent of the exposure. Any benefits or costs resulting from these exposures are passed directly to the client concerned. Your performance will be assessed against a benchmark based on if you undertook 100 per cent of the hedging at the time you are notified of the exposure. Foreign exchange and commodity exposures which are not covered by settlement date will be force liquidated at penalty rates of US$100 per tonne for copper and 100 points for foreign exchange worse than the then market rate. (Note: a deal slip is still required to be completed on the date of delivery of the foreign currency amount or commodity for all unhedged amounts.) CASH BALANCES At the start of the game Central Treasury has a balance of $2 000 000 in its A$ bank account and zero balance in its US$ and EUR accounts. Central Treasury’s starting cash balance earns interest at five per cent per annum. This cash balance and the administration revenue received each quarter is used to meet operating expenses and penalty costs. Penalties associated with poor cash management and errors will be paid by the Central Treasury and will not be passed onto your clients. Poor cash management includes large uninvested cash balances. If the Portfolio’s bank account is overdrawn, the following penalty rates will apply to the Central Treasury: 0 – 20 000 0% 20 000 – 1 000 000 5% pa > 1 000 000 10% pa The Portfolio in this case will be charged the three month commercial paper cost of funds. Uninvested Portfolio cash balances will attract the following penalties to the Central Treasury: 0 – 20 000 0% > 20 000 3 month commercial paper rate CTM PORTFOLIO MANAGEMENT GAME PAGE 6 PENALTIES Penalties may be incurred for the following reasons: Using the wrong side of the bid/offer spread Using wrong interest/exchange rates Incomplete deal dockets Failure to enter into Cross Currency Swaps to convert foreign currency bond issues Overdrawn cash balances Uninvested cash balances Failure to undertake foreign currency or commodity transactions for the physical position Violation of management ranges (benchmark, investment and facility class) STARTING PROFILE At the start of the game (15 March 2004) you have issued the following amounts to generate the A$1 billion which has been onlent to your clients. (i) Domestic Bond Program DB05 Face Value A$125 000 000 Maturity 15 March 2005 (1 year) Coupon 5.70% pa (semi-annual payable September and March) Yield 5.70% pa Issue Price $100.00 DB07 Face Value A$125 000 000 Maturity 15 March 2007 (three years) Coupon 5.75% pa (semi-annual payable September and March) Yield 5.75% pa Issue Price $100.00 DB09 Face Value A$200 000 000 Maturity 15 March 2009 (five years) Coupon 5.79% pa (semi-annual payable September and March) Yield 5.79% pa Issue Price $100.00 DB14 Face Value A$150 000 000 Maturity 15 March 2014 (10 years) Coupon 5.87% pa (semi-annual payable September and March) Yield 5.87% pa Issue Price $100.00 CTM PORTFOLIO MANAGEMENT GAME PAGE 7 (ii) Commercial Paper Facility CP3M Face Value A$202 797 180.25 Maturity/Rollover 15 June 2004 (92 days) Yield 5.53% pa Issue Price $98.625298443 (iii) Eurobond Program (US$) US14 Face Value US$76 500 000 Maturity 15 March 2014 (10 years) Coupon 4.50% pa (semi-annual payable September and March) Yield 4.40% pa Issue Price US$100.80200927 Swapped into floating rate A$: CCSUS14 Exchange rate 0.7650 A$ Principal A$100 000 000 Pay 3 month A$ Bank Bills Currently 5.53% pa Receive fixed coupon US$ 4.50% pa (semi-annual payable September and March) Fixed yield 4.63% pa Maturity 15 March 2014 (iv) Eurobond Program (EUR) EUR09 Face Value EUR60 500 000 Maturity 15 March 2009 (5 years) Coupon 3.50% pa (semi-annual payable September and March) Yield 3.48% pa Issue Price EUR100.09106016 Swapped into floating rate A$: CCSEUR09 Exchange rate 0.6050 A$ Principal A$100 000 000 Pay 3 month A$ Bank Bills Currently 5.53% pa Receive fixed coupon EUR 3.50% pa (semi-annual payable September and March) Fixed Yield 3.73% pa Maturity 15 March 2009 CTM PORTFOLIO MANAGEMENT GAME PAGE 8 (v) You have entered into the following interest rate swaps: IRSDB07 Principal A$50 000 000 Maturity 15 March 2007 (3 years) Pay fixed coupon A$ 5.75% pa (semi-annual payable September and March) Fixed Yield 6.06% pa Receive 3 month Bank Bills Currently 5.53% pa IRSDB14 Principal A$150 000 000 Maturity 15 June 2014 (10 years) Pay fixed coupon A$ 5.87% pa (semi-annual payable September and March) Fixed Yield 6.10% pa Receive 3 month Bank Bills Currently 5.53% pa CLIENT PROFILES QUEENSLAND ELECTRO POWER AUTHORITY (QEPA) QEPA manages an electricity generating company. It has A$600 million of eight year debt which it is repaying fairly quickly out of operating profits. It’s projected revenue and expenses for the coming year are: (i) Revenue Sales A$180 000 000 (ii) Expenses Copper purchases A$16 369 891 Debt Service Payment A$96 093 664 Other A$36 000 000 (iii) Profit A$31 536 445 QEPA purchases 5000 tonnes of copper on 15 December 2004. The forecast cost of copper over the coming year has been calculated based on current forward rates. QEPA has outsourced their Treasury function to you. This allows you to make decisions regarding QEPA exposures. Such as whether to hedge FX and Copper, and the use of forwards etc. A PORT AUTHORITY (APA) APA currently has A$300 million of eight year debt. Annual repayment of principal and interest is budgeted at $48 046 832. APA is planning to borrow an additional A$100 million for eight years to finance the construction of a new port facility. APA also has an obligation to pay a European supplier EUR 5 000 000 in six months time (15 September 2004). CTM PORTFOLIO MANAGEMENT GAME PAGE 9 LOCAL GOVERNMENT (LG) LG currently has A$100 million of seven year debt. It operates on a tight budget that is heavily dependent on State Government grants and rates. Its projected budget for the coming year is: (i) Revenue Rates A$45 500 000 Grants A$60 000 000 Business Income A$10 000 000 (ii) Expenses Salaries A$60 000 000 Debt Service Payment A$17 771 012 Other A$35 000 000 (iii) Projected Surplus A$2 728 988 BORROWING RATES FOR ADVANCES Debt Service Payments are based on an assumption that all client debt is lent on a credit foncier basis. The appropriate interest rate (which includes an administration margin of 0.50%) for each advance can be found in the following table. All clients repay on a quarterly basis. You will need to calculate Debt Service Payments for all future advances based on the rates at the time of the advance. The borrowing rates for Quarter 1 advances are shown below. Term (years) Borrowing Rate 1 6.16% 2 6.19% 3 6.21% 4 6.23% 5 6.25% 6 6.27% 7 6.29% 8 6.31% 9 6.33% 10+ 6.33% PLAYING THE GAME TODAY IS 15 MARCH 2004 APA have just notified you that they need to borrow A$100 million for eight years from 15 March 2004. You must decide: (i) The impact of the drawdown on the portfolio position (ii) Which is your preferred duration (relative to benchmark), and (iii) What transactions to perform to structure your portfolio to take advantage of your CTM PORTFOLIO MANAGEMENT GAME PAGE 10 anticipation of movement in rates and to raise funds to cover APA’s drawdown and any futures deposit margins. You can also decide to hedge future obligations through forward copper and foreign exchange contracts if this is consistent with your view of the relevant markets. FUTURE QUARTERS At the start of each of the future quarters you will need to manage your cash flows and determine your portfolio position relative to benchmark in light of the current economic climate. Cashflow variables will include portfolio generated cashflows and cashflows relating to client requirements. Portfolio generated cashflows include: Maturity of commercial paper Coupon payments on bonds Interest payments on swaps Administration Futures Deposit Margins/Variation Margins and Brokerage Costs Client cashflows include: Debt service payments Advances Repayments At the start of this and subsequent sessions you will be given a report which shows your performance during the previous session. You are required to review your performance to learn from your past actions. Rates will change after each session. Deals done must reflect the most recently available price information. For simplicity all cash flows (eg, drawdowns, repayments, coupons, debt service payments, foreign exchange and commodity payments etc) will occur on the 15 of June, September, December or March. STRATEGY REPORT You are required to complete a Strategy Report at the start of each session. This articulates your view on rates and the actions which you plan to follow to put your strategy into practice during the coming quarter. You are provided with a rate sheet at the start of each quarter. This updates you on the market rates which are then available. You are also provided with the Economic Overview. This will help you formulate your Team view which will be important in formulating your strategy. CTM PORTFOLIO MANAGEMENT GAME PAGE 11 DEAL SLIPS When you decide to do a transaction you must complete the relevant deal slip and submit it to the Back Office. Separate deal tickets exist for different transactions: Commercial Paper Bonds Swaps FX Commodities Futures It is important to correctly record all relevant information on the deal slip. This will include: Transaction date Security Code Counterparty for Investments Specifics of the transaction – eg, currency, amount, rates, maturity date, whether you are buying or selling etc Your signature or initials Should the details on the deal slip be incorrect, the details will be corrected. However, your team will be penalised for recording incorrect details. Deal slips must be submitted by the designated cut-off times otherwise they will be ignored. Deal slips will be collected prior to the issue of a fresh rate sheet. You are advised to keep a record (blotter) of all deals done. PERFORMANCE MEASUREMENT The real value of the portfolio management game lies in how much you learn from playing it. Your team’s performance will be measured across a number of areas and you will be given a performance report each quarter detailing your financial performance. The report will include: Market Value Cost of Funds versus that of the other teams and against benchmark. Profit or loss from management of commodity and currency exposures. Penalties incurred (if any) from poor cash management or operational errors. Number of errors made. A major weighting in the assessment of your team’s performance will be your strategy – how well was it formulated, did your actions match your strategy, how well were you able to adapt to change, etc TECHNOLOGY Each team is provided with a set of spreadsheets that will assist you in your decision making. CTM PORTFOLIO MANAGEMENT GAME PAGE 12 You can use these spreadsheets to do scenario analyses. Deals are only done when you submit the deal slip. You will be given instruction on how to use the computer models. DISPUTES The Back Office has absolute power to vary rules at any time and their decision on any dispute is final. CHECK LIST Each quarter you are required to do the following: 1. ASCERTAIN YOUR FUNDING REQUIREMENTS To calculate how much you need to raise, calculate your bank balance after settlements. What is your opening bank balance What Portfolio inflows and outflows are occurring on balance date What new drawdowns/client repayments are required You should consider: Portfolio generated cashflows Coupon payments due Swap payments due Administration charges Maturing commercial paper Variation margins Deposit margins and brokerage costs Client cashflows Debt service payments due Repayments Advances After determining your portfolio generated cashflows you should ensure that the duration of your initial position is approximately that of the closing position on your performance report. This will indicate that you have correctly calculated the portfolio generated cashflows. 2. DETERMINE YOUR STRATEGY Review economic scenarios. Establish your view on the direction that rates will move during the coming quarter/year. Decide on your target duration. CTM PORTFOLIO MANAGEMENT GAME PAGE 13 3. COMPLETE DEAL SLIPS What deals will achieve your strategy Decide what bonds/commercial paper you will issue or redeem. Decide what swaps and/or futures you will do. Decide if you wish to hedge your future copper and foreign currency exposures. Keep a record of the deals done. Confirmed deals blotter Commodity exposure report USD exposure report EUR exposure report 4. SUBMIT RECORDS TO THE BACK OFFICE All deal slips Bank balance calculation Coupon payment calculations Maturities calculation Swap payments calculations Strategy report Futures calculations PARTICIPANT’S SPREADSHEET Every quarter you are required to determine how you wish to manage your portfolio. You are given a spreadsheet with eight sheets per quarter (seven in Quarter 1) to assist you to make these decisions. There is a clicker at the top of each page to facilitate movement between the sheets. Each sheet contains different information and it is advised that you use all of the information contained in these sheets before deciding on the final deals that you wish to undertake. The eight sheets supplied are: 1. Information – Displays the main information about each security and the benchmark of your portfolio for the current quarter. 2. Rates – Displays the current rates, implied forward rates and allows you to enter in a ‘what if’ scenario. 3. Yield Curve – Graphs the current rates, implied forwards and the ‘what if’ scenario. 4. Initial Position – Shows in detail the break-up of the initial position of your portfolio. This includes the proportion you have of your portfolio in each facility class, your actual proportions against benchmark and your actual duration against benchmark. You are also given your opening bank balance and shows the Portfolio Generated Cashflows that was entered on the previous screen. You are able to go to the Portfolio Generated Cashflows page via this screen. 5. Deal Entry – This is where you enter in your Client Cashflows and determine what deals you wish to do. The graph here shows the duration of your portfolio after each deal you have confirmed. 6. Position Including Deals – This shows the same information as the Initial Position page but includes confirmed deals. 7. Proportions – This shows the actual and benchmark proportions of Commercial Paper and Domestic Bonds. 8. Portfolio Generated Cashflows – This is where you enter your Portfolio Generated Cashflows. You are required to calculate this at the beginning of Quarters 2, 3 and 4. This figure combined with your Client Cashflows determines your Net Funding Requirements. You are able to change this figure during the session if you need to. This page can be accessed via the Initial Position page. The following pages will examine each sheet in further detail. This will assist you in extracting as much information as possible from the spreadsheet. Some sheets in the spreadsheet require you to input values. The cells that you are required to change are formatted RED. The sheets that require you to enter values are as follows: 1. Portfolio Generated Cashflows This takes into account: Bond Coupons Swap Payments Maturities Administration Futures Variation Margins/Deposit Margins/Brokerage 2. Deal Entry Client Cashflows Advances Repayments Debt Service Payments CTM PORTFOLIO MANAGEMENT GAME PAGE 14 1. INFORMATION This page gives you information about each of the instruments that you can use to manage your portfolio. It provides a description of each instrument, its maturity, coupon and currency. It also provides a reference for the benchmark proportions of your portfolio for the current quarter, along with some management ranges that you need to comply with. 2. RATES This page displays the rates for the quarter. It shows the buy/sell rates that are used for any deals that you wish to do during the quarter. It is up to you to determine which side of the spread is appropriate for the deal that you are doing. Changes in rates will be updated during the game for your use in subsequent quarters. These rates are graphed and can be viewed on the Yield Curve page. CTM PORTFOLIO MANAGEMENT GAME PAGE 15 3. YIELD CURVE This graph shows the rates for the current quarter, the implied forward rates and allows you to graph where you think rates might be going by moving the red yield curve using the clickers on the table. 4. INITIAL POSITION This shows your initial position for the quarter. It supplies you with the proportions of each facility class, benchmark and actual weights, and the benchmark and actual duration of your portfolio. The main table provides you with detailed information about your opening position. This includes the face value, market value, coupon and duration of each security on issue. The total value of your portfolio is also shown. Your starting bank balance is shown as well as your Portfolio Generated Cashflows for the quarter (the value entered on the Portfolio Generated Cashflows sheet for Quarters 2, 3 and 4). Your Cash at Bank will be positive for those with cash in the bank and negative for those in overdraft. These figures, combined with your Client Cashflows determine your Net Funding Requirements. CTM PORTFOLIO MANAGEMENT GAME PAGE 16 5. DEAL ENTRY CTM PORTFOLIO MANAGEMENT GAME PAGE 17 CTM PORTFOLIO MANAGEMENT GAME PAGE 18 How to Use the Deal Entry Screen The Deal Entry Screen will be the most frequently used screen during each session. The graph gives you an up to date indication of where your portfolio is positioned with respect to benchmark. The small white box shows the duration of your initial position and the blue arrow shows the duration of your portfolio after your confirmed deals. At the beginning of Quarter 1, ensure that the initial position duration and the duration of your portfolio are the same (the blue arrow should be sitting on the white box). In Quarters 2, 3 and 4, ensure that the initial position duration (after your Portfolio Generated Cashflows have been entered) is approximately that of the closing duration shown on your Performance Report. After you have checked this information, enter in your Client Cashflows. In Quarter 1 you are required to fund $100 000 000 for APA. Enter this value as -100 000 000 in the Client Cashflows box. All funds to be raised by the portfolio are to be entered as a negative while repayments from your clients would be entered as a positive. Once you have entered this information, you are now able to determine what deals you would like to do to manage your portfolio to your desired duration. How to Enter a Deal Once you have decided what type of deal you would like to do, select it from the clicker on the left. This will then bring up information about that security (maturity date, coupon etc). You then need to select whether you want to Buy/Sell, Issue/Invest or Pay/Receive using the second clicker on that row. There are two clickers for Swap transactions to allow for both sides of the swap. Now you need to enter in the details of the transactions. The information required is: Face Value (Currency of Issue) Yield that the deal is done at (ensure you have the correct side of the spread) Spot rate for Eurobond and Cross Currency Swaps (this is the mid rate) After entering these details, the proceeds of this deal will then be displayed. If you would like to see the effect that this deal would have on your portfolio, tick the ‘Confirm’ checkbox. The graph will then update with the new duration of your portfolio. The green area of this graph shows the management range that you must stay within. If you enter the red section, you have violated the management range. If you decide that you do not want to include a deal, leave the ‘Confirm’ checkbox blank. You do not have to delete the deal. After you have decided on the deals that you wish to do, you should record them on the blotter provided and write up a deal slip. At the end of the session, you must submit your deal slips to the Back Office for processing. If there are incorrect values (eg, rates) entered, the Back Office will correct them though penalties may be incurred. Some Tips on Entering Deals Check that the rates you enter are the correct ones or the position of your portfolio will be different to what you expect. Ensure you enter into a Cross Currency Swap for each Eurobond deal. When entering into a Swap transaction, enter the Fixed side on the first line and the Floating side on the second. For the Floating side of a Swap, use the Mid Rate. For Eurobond and Cross Currency Issues, use the Mid Rate when entering in the Spot Rate. Ensure that you have both the Pay and Receive side of each Swap. 6. POSITION INCLUDING DEALS Like the Initial Position sheet, this shows you a breakdown of your portfolio taking into account the deals that you have Confirmed with a tick. It shows your initial position, the position of the deals that you have done and your total position. Again, it shows you the proportion of each facility class, your benchmark duration and the actual duration of your portfolio. Use this page to ensure that you comply to all management ranges. 7. PROPORTIONS These graphs show you the proportions of Commercial Paper and Domestic Bonds compared to Benchmark for both your Initial Position and your portfolio after Confirmed Deals. These are useful to see if the deals you confirm correspond to your strategy. CTM PORTFOLIO MANAGEMENT GAME PAGE 19 8. PORTFOLIO GENERATED CASHFLOWS At the beginning of Quarters 2, 3 and 4 you are required to calculate your Portfolio Generated Cashflows. These include Maturiti