Fixed Income Yield Curve Strategies

Yield curve strategies can span the whole yield curve or be limited to a certain term area such as mid term bonds.

Fixed income yield curve strategies. Reprinted with permission from understanding the yield curve united states fixed income research portfolio strategies may 1995. The point on the yield curve indicating the year in which the economy s highest interest rates occur. Duration is used as a measure of a portfolio s sensitivity to a change in interest rates. The yield elbow is the peak of the yield curve signifying where the highest.

A flat yield curve generally shows when the economy is going through a change. In the current environment many fixed income investors may see little value in taking on duration risk. The stock in trade of the yield curve strategist is bond mathematics. Fixed income analysis using risk analysis.

Scribd is the world s largest social reading and publishing site. The average return on long term bonds exceeds the return on short term bills by a large amount over short investment horizons. A riding the yield curve investment strategy takes advantage of the. If you invest in the 7 to 15 year bonds although there is little yield pickup when the short security matures the longer.

A barbell strategy entails investing at the short and long ends of the yield curve and is generally employed by investors who expect the yield curve to flatten. A flat yield curve indicates a slowing economy according to hurley. Fixed income analysis using trading strategies. For instance if it is going from recession to expansion an inverted yield curve will first become flat and then may become normal.

One long standing yield curve strategy has been to shorten duration when the curve flattens. Below are several general examples.