6 Top Tips For Writing Successful Fixed Income Commentary

Bonds. Just the word itself can be enough to bring investment writers out in hives. Deemed difficult by some and boring by others, bonds are like the shambling drunk at the party. No-one wants to get up close and personal.

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So, please tell me more about five-year five-year forwards…

For your average investor, that’s a problem. Lots of people up and down the country, working in a whole raft of industries, are invested in bonds (or fixed income, as they’re also known). And having entrusted their money to an asset manager, they have every right to expect communications couched in plain language that’s easily understood.

The good news is, when you strip away the jargon and the financial maths, fixed income isn’t (or shouldn’t be) so terribly difficult to articulate for clients. Lots of companies are good at this: they cut out jargon and write clearly. For those who want to follow their lead, here are our top-six tips to writing accessibly about fixed income.

1. Beware the Yield Curve
The yield curve makes regular appearances in fixed income commentaries. And it’s a useful thing – it can tell us a lot about what bond investors are pricing in and even give us pointers about the health of the economy. But, without context and knowledge of what it represents, it is simply a line on a chart.

Imagine a client, with limited financial knowledge, reading this monthly commentary: “during the month, we added to the belly of the curve”. The reader could be forgiven for picturing a pot-bellied beast, snuffling in a cave. Don’t give your reader nightmares – if you mean “we bought some medium-dated bonds”, say so.

A tired metaphor for medium-dated bonds, yesterday.

A tired metaphor for medium-dated bonds, yesterday.

Overall, unless you’re 100% confident that your audience is well acquainted with the yield curve, don’t go there. But if you absolutely have to go there, provide some context, so that the reader understands what it means. Which brings me to:

2. Think Creatively
If you’re writing about bonds for an online readership, it’s worth sitting down with your digital/online team and coming up with some creative alternatives. For example, an interactive chart is a great way to explain our old friend, the yield curve. Create a ‘normal’ yield curve and show how it could move in different economic/market scenarios. Or, write an online glossary of common bond words, letting the reader hover over terms like ‘high-yield bonds’ and read the explanation. This keeps the body copy short without cluttering it up with long-winded explanations. Most importantly, it can differentiate your web copy, while genuinely helping your clients to understand bonds better.

3. Get Shot of the Jargon
Fixed income jargon ranges from the odd to the incomprehensible. Perhaps that’s why a lot of fixed income writing is too complex for the end investor. It’s important to purge your writing of jargon and ensure that any technical language is properly explained.

Take yields. For people used to stockmarkets, where gains are measured by the price performance of an index, fixed income can be unsettling at first. Take a tip from the Financial Times and, the first time you mention a yield, considering explaining to the reader what it means. For example: “The ten-year US Treasury yield dipped to 1.93% in January. Its yield moves inversely with its price.”

As well as binning the jargon, don’t be afraid to be a ruthless editor. Tangled, meandering sentences are unhelpful at the best of times. They’re doubly so when the reader is tackling an unfamiliar or tricky subject. And does even the most ardent follower of bond markets want to read a 70-word sentence on the subject? I doubt it.

4. Fund activity – Make it Simple
For the uninitiated, fund activity sections are the bits of a report where the fund manager explains what they bought and sold, and why. As a writer, your job is to avoid this turning into a litany of transactions, or a bloodbath of jargon. In our experience, the trick is to focus on the fund manager’s ideas – in other words, what he/she thinks, instead of the means to express it.

For example, the fund manager might write that “last month, we invested in five-year five-year forwards”. This phrase often crops up in commentaries talking about UK inflation-linked bonds, or their US equivalents, TIPs. You might think this is borderline incomprehensible (you’d be right).

But focus on the fund manager’s view. The “five-year, five-year forward” break-even rate measures inflation expectations starting in five years, and running five years from that date. To put this simply for a client, an alternative might be “we took a position that expressed our view on inflation levels in five years’ time”.

5. Cause Before Effect
A good general rule in financial writing, this is especially useful when you’re writing about something prone to complexity, such as fixed income. Say what has happened in the economy, then explain how bonds moved in response. For example: “as concerns over the global economy intensified, gilt yields touched record lows.”

6. Talk to the Fixed Income Team
In a previous role, I sat listening to a bond fund manager talking about contingent convertible bonds. No-one was asking any questions, so I assumed everyone knew what they were. I needed content for a new article, so I asked him a few questions. Amid the silence, I was worried I’d look silly, but the fund manager was pleased I’d shown an interest. He explained how contingent convertible bonds worked (they were quite new on the scene) and I wrote an article that we subsequently published online. The lesson here is, question the fund manager – about new regulations and what they think about the market. Fund managers are a great source of ideas for future articles, and the more you know about bond markets, the better you’ll be at articulating them for your clients.