Published date: 21st October 2025 | Author: PT Asset Management
The Shape Management approach allows us to rely on the mathematical nature of fixed income to analyse how a bond will perform in various interest rate environments over time – and how this way of investing can lead to potentially superior outcomes for our clients.
There was a deal last month in Municipal land that can illustrate the benefits of Shape Management and the shortcomings of traditional metrics. It was a Water Revenue Bond by the City of San Antonio, with maturities ranging from 2027-2048.
Three-year horizon total return analysis (Illustrative performance)
As portfolio managers, we make investment decisions among thousands of CUSIPs. But as we see in this example, even just four bonds can feel noisy!
Sources: PTAM, Bloomberg as of 23/09/2025. These Shapes represent two bonds within a serial issuance brought to market by the City of San Antonio, TX. The bonds used to generate the Shapes have differing maturities: 2032 (2.67% Yield), and 2038 (3.56% Yield). None of the bonds used to create the Shapes are held by PTAM clients as of the date of this distribution.
Assumptions: (1) a parallel shift in the yield curve (2) static allocation for 3 years (3) linear rate changes (4) sector specific spreads are held constant across five rate scenarios (5) reinvestment rate consistent with respective sector.
The 2032 bond is a clear “dog” to the 2038 bond, as it underperforms the 2038 bond in most interest rate scenarios. Nevertheless, the 2032 had HIGHER investor interest than the 2038 as measured by subscription levels.1
1- The 2032 had subscription levels of 4.92x. The 2038 had subscription levels of 2.39x.
Here are the other two bonds for consideration:
Sources: PTAM, Bloomberg as of 23/09/2025. These Shapes represent two bonds within a serial issuance brought to market by the City of San Antonio, TX. The bonds used to generate the Shapes have differing maturities: 2035 (3.09% Yield), and 2042 (4.05% Yield). None of the bonds used to create the Shapes are held by PTAM clients as of the date of this distribution.
The 2035 bond was the MOST LOVED bond in the deal, with one of the highest subscription levels – more than 8 times oversubscribed! Through the lens of Shape Management, it’s a no-brainer dog when compared to the 2042 bond…which had subscription levels of 1.72x.
While we did not participate in this deal, it is evident that Shape Management provided more clarity to the decision-making process. Investors would have been better off using Shape Management than the traditional framework of fixed income investing!
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