Book Review: Bonds in a day: Everything you need to master the mathematics that drives bonds

Being laid up with a knee injury has hindered my work life, social life and made exercise impossible. On the plus side, though, it has provided me with the time to dedicate a whole day to reading about bonds. In his book Bonds in A Day, Stewart Cowley aims to provide you with everything you need to understand bond markets and calculate how to value a bond in just 140 pages.

With 30 years of experience having headed up bond teams at Invesco, Newton and Old Mutual, there is no doubt that Mr Cowley knows his stuff. His challenge is to simplify what is undoubtedly the most complex of asset classes: to allow non-bond experts to complete the book without their eyes glazing over. 

He does a pretty good job. There is no easy way to make bonds simple, and you do need to understand the maths to gain a good understanding of pricing of bonds and the working of markets.

Throughout the book Mr Cowley presents equations simply and provides good examples of how to use Excel to calculate your discount rates, yields and duration. Along the way the commentary provides everything from an insight into the history of bonds, the relationship between the yield curve and economic cycle, and classification of different bonds and their risks. He makes good use of a wide range of off-the-wall analogies to lighten what can be a dry subject. For example, his comparison of how a monkey eats a banana can provide you with a guide to calculating how much interest a bond has earned.

While maybe not a book for the beach this summer, this is a well written text book that explains the fundamentals of bond investing. This is not just a guide for the wannabe bond manager. Do such people exist?

The importance of bond markets in pricing of all asset classes means that if you are to manage or advise on any investments to clients you need to be able to have a good knowledge of the asset class this book provides. If you are laid up with a knee injury (and have a cold towel handy for the forehead for some of the trickier equations) then you can treat yourself to an intensive day of bond reading. Otherwise you may prefer to read the book in bitesized chunks and keep it by your side as a handy reference guide.

Published by Harriman House. Gavin Haynes is managing director of Whitechurch Securities Wealth Managers