BUG: cms remove repo proceeds method (#693)

Co-authored-by: JHM Darbyshire (M1) <[email protected]>
attack68 · Feb 26, 2025 · dec17c9 · dec17c9
1 parent 640689b
commit dec17c9
Show file tree

Hide file tree

Showing 3 changed files with 105 additions and 8 deletions.
diff --git a/docs/source/i_whatsnew.rst b/docs/source/i_whatsnew.rst
@@ -33,6 +33,10 @@ email contact, see `rateslib <https://rateslib.com>`_.
    * - Refactor
      - Rename :class:`~rateslib.instruments.BaseMixin` to :class:`~rateslib.instruments.Metrics`.
        (`678 <https://github.com/attack68/rateslib/pull/678>`_)
+   * - Refactor
+     - Minor changes to :class:`BondFuture.cms <rateslib.instruments.BondFuture.cms>` to avoid
+       the proceeds method of repo rates and utilise only a bond curve for forward bond prices.
+       (`693 <https://github.com/attack68/rateslib/pull/693>`_)
    * - Bug
      - Add :class:`~rateslib.instruments.NDF` to global *rateslib* namespace.
        (`682 <https://github.com/attack68/rateslib/pull/682>`_)

diff --git a/python/rateslib/instruments/bonds/futures.py b/python/rateslib/instruments/bonds/futures.py
@@ -490,16 +490,13 @@ def cms(
         }
         for shift in shifts:
             _curve = bcurve.shift(shift, composite=False)
+            future_price = self.rate(curves=_curve, metric="future_price")
             data.update(
                 {
-                    shift: self.net_basis(
-                        future_price=self.rate(curves=_curve),
-                        prices=[_.rate(curves=_curve, metric=metric) for _ in self.basket],
-                        repo_rate=_curve._rate_with_raise(settlement, self.delivery[1], "NONE"),
-                        settlement=settlement,
-                        delivery=delivery,
-                        convention=_curve.convention,
-                        dirty=dirty,
+                    shift: tuple(
+                        bond.rate(curves=_curve, metric="clean_price", forward_settlement=delivery)
+                        - self.cfs[i] * future_price
+                        for i, bond in enumerate(self.basket)
                     ),
                 },
             )

diff --git a/python/tests/test_instruments_bonds.py b/python/tests/test_instruments_bonds.py
@@ -2688,3 +2688,99 @@ def test_futures_duration_and_convexity(self, delivery) -> None:
         result = future.duration(112.98, delivery=delivery, metric="modified")[0]
         expected = 7.23419455163
         assert abs(result - expected) < 1e-3
+
+    def test_cms(self):
+        data = DataFrame(
+            data=[
+                [
+                    FixedRateBond(
+                        dt(2022, 1, 1), dt(2039, 8, 15), fixed_rate=4.5, spec="ust", curves="bcurve"
+                    ),
+                    98.6641,
+                ],
+                [
+                    FixedRateBond(
+                        dt(2022, 1, 1),
+                        dt(2040, 2, 15),
+                        fixed_rate=4.625,
+                        spec="ust",
+                        curves="bcurve",
+                    ),
+                    99.8203,
+                ],
+                [
+                    FixedRateBond(
+                        dt(2022, 1, 1),
+                        dt(2041, 2, 15),
+                        fixed_rate=4.75,
+                        spec="ust",
+                        curves="bcurve",
+                    ),
+                    100.7734,
+                ],
+                [
+                    FixedRateBond(
+                        dt(2022, 1, 1),
+                        dt(2040, 5, 15),
+                        fixed_rate=4.375,
+                        spec="ust",
+                        curves="bcurve",
+                    ),
+                    96.6953,
+                ],
+                [
+                    FixedRateBond(
+                        dt(2022, 1, 1),
+                        dt(2042, 11, 15),
+                        fixed_rate=4.00,
+                        spec="ust",
+                        curves="bcurve",
+                    ),
+                    90.4766,
+                ],
+            ],
+            columns=["bonds", "prices"],
+        )
+        usz3 = BondFuture(  # Construct the BondFuture Instrument
+            coupon=6.0,
+            delivery=(dt(2023, 12, 1), dt(2023, 12, 29)),
+            basket=data["bonds"],
+            nominal=100e3,
+            calendar="nyc",
+            currency="usd",
+            calc_mode="ust_long",
+        )
+        result = usz3.cms(prices=data["prices"], settlement=dt(2023, 11, 22), shifts=[-50, 0, 50])
+        expected = DataFrame(
+            data={
+                "Bond": [
+                    "4.500% 15-08-2039",
+                    "4.625% 15-02-2040",
+                    "4.750% 15-02-2041",
+                    "4.375% 15-05-2040",
+                    "4.000% 15-11-2042",
+                ],
+                -50: [
+                    0.0,
+                    0.10938764224876252,
+                    0.32693578691382186,
+                    0.24721845093496597,
+                    1.1960030963801813,
+                ],
+                0: [
+                    0.0,
+                    0.01148721023514554,
+                    0.016282194434154462,
+                    0.032902987886402,
+                    0.33598669301149187,
+                ],
+                50: [
+                    0.43066112621522734,
+                    0.3653207547713322,
+                    0.19632745772335625,
+                    0.27120849999053576,
+                    0.0
+                ],
+            }
+        )
+        assert_frame_equal(result, expected)