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What is Active Bond Portfolio Management Strategies?

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chiara44
"Active Bond Portfolio Management Strategies includes following five aspects: I. Interest Rate Anticipation: • Reduce the portfolio duration when interest arte rate is expected to increase and vice versa. • Increase the investment in long duration bonds when interest rates are expected to decline • Move into shorter duration bonds if interest rate is going to be declined II. Valuation Analysis: • Select the bonds on the basis of their intrinsic values • Identification of major factors that affect the bond’s intrinsic values. • Bond’s rating, call feature etc. • Buy the undervalued bonds and sell the overvalued bonds III. Credit Analysis • It involves detailed analysis of the bond issuer to determine expected changes in its default risk • Identification of internal and external factors which affect the credit rating of the company. • Explanation of credit analysis model IV. Yield Spread Analysis: • Yield spread can give investors ideas for potential investment opportunities. In other words it is the difference between yields on differing debt instruments that share a common time to maturity. • Factors affecting yield spread: Business cycle, Volatility in the market interest rate • The higher the yield spread better the investment investment opportunity V. Bond Swaps: • It involves liquidating a current position and simultaneously buying a different issue in its place with similar attributes but having a chance for improved return. • The main purpose of the bond swap is portfolio improvement. • Different types of bond swaps: Pure Yield Pickup Swap, Substitution Swap, Tax Swap. Source: http://in.docsity.com/en-docs/Active_Bond_Portfolio_Management_Strategies_-_Security_Analysis_and_Portfolio_Management_-_Solved_Quiz_"
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larag
"Reduce the portfolio duration when interest arte rate is expected to increase and vice versa."
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