When it comes to bond pricing, one message that rang out clear at Information Management Network’s ABS East Conference on Sunday: investors need to do their own homework and make sure they know what’s behind the valuation tools they employ.
For Rubin Bahar, a senior analyst at Eagle Asset Management, who spoke on a panel on bond pricing and valuation tools, the best analysis is the one he does himself.
End user investors must understand how valuations are configured and where the numbers come from. Bahar explained that consistency was key for valuation to continue to matter. “Don’t try and underscore the pricing because then you risk becoming irrelevant like the rating agencies,” Bahar said.
Although panelists agreed that transparency of valuation models is key to successful bond pricing, they said that another aspect that is equally as important is the review of the analysis.
“You have to have that transparency but its also important to do that fundamental analysis,” said Scott Gibson, vice president at Clayton Holdings and also a speaker on yesterday’s panel. “Part of the process of that transparency is a review of that analysis.”