bond - What are some of the best textbooks on Fixed Income securities?

I'm looking for something that might be considered the 'Bible' of fixed income.

Ideally it would contain everything from the basics of PV and discounting cash flows all the way up to some of the most complicated instruments, such as cross-currency basis swaps, although I understand that this may have to cover two books, such as 'An Intro to Fixed Income' and 'Further Fixed Income', or 'Advanced Fixed Income'.

Thanks.

Answer

If I were to recommend one, it would be:

• Bruce Tuckman's Fixed Income Securities. This is by far my absolute favorite. It is extremely well written and discusses complex concepts in very easy-to-understand terms. Tuckman is both an academic and a practitioner (Salmon/Credit Suisse/Lehman/Barclays), so the book takes great care in addressing many real-life considerations of fixed income trading/investing that other books either gloss over or ignore. The book is also filled with excellent trading examples. (I should mention that I prefer the 2nd edition to the 3rd edition, which in my mind has a more logical organization of the material, although you'd miss out on modern topics such as multi-curve construction. I also recommend that you search around for research notes Tuckman wrote at Lehman, which are timeless master pieces for thinking about different concepts/strategies.) (Disclosure: I don't know the guy, but I clearly admire his intellect.)

Tuckman's book is more or less oriented toward undergrads/MBAs/practitioners, so it does not rigorously address topics that require a lot of stochastic calculus. For a more rigorous (and yet not esoteric) treatment, my favorite is

• Pietro Veronesi's Fixed Income Securities: Valuation, Risk, and Management. This is another masterfully written book that blends theory and practice very well. It covers everything you'd expect, from discounted cash flows to interest rate modeling in continuous time. It is also very practitioner friendly, with step-by-step guides to implementing all the models. This title strikes a perfect balance between mathematical rigor and accessibility, and is used by many MFE programs from what I heard.

Other references:

• Siddhartha Jha's Interest Rate Markets: A Practical Approach to Fixed Income is an excellent reference for fixed income strategy, written by a trader/strategist. It uses very little math, but discusses many real-life trading strategies. You can learn a lot of ideas not usually covered in mainstream textbooks.


• Damiano Brigo and Fabio Merccurio's Interest Rate Models is, for a long time, the bible for fixed income quants. It provides detailed coverage of many interest rate models and their implementations. In my mind, it is almost certainly not a title for beginners, but it's an invaluable reference for those in quantitative roles.


• Leif B. G. Andersen and Vladimir V. Piterbarg's Interest Rate Modeling, which comes in three volumes, represents the state of the art and is widely considered the new bible(s). Like Brigo & Merccurio, these are best treated as reference books rather than textbooks.


• Depending on which track you go down, there are also "bibles" for specific areas of fixed income. For example, "The Treasury Bond Basis" is the bible for bond futures traders; "Salomon Smith Barney Guide to Mortgage-Backed and Asset-Backed Securities" is the definitive guide to the MBS market, etc.