Bond strategies
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Bond Strategies. Active and Passive. Active Bond Strategies. Active Bond Strategies. Strategic Frontier (Best Case - Worst Case) Interest Rate Anticipation Riding the Yield Curve Bond Swaps. 1. Strategic Frontier. 1. Strategic Frontier. 1. Best Case - Worst Case. I. II. IV.

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Bond Strategies

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Bond strategies

Bond Strategies

Active and Passive


Active bond strategies

Active Bond Strategies


Active bond strategies1

Active Bond Strategies

  • Strategic Frontier (Best Case - Worst Case)

  • Interest Rate Anticipation

  • Riding the Yield Curve

  • Bond Swaps


1 strategic frontier

1. Strategic Frontier


1 strategic frontier1

1. Strategic Frontier


1 best case worst case

1. Best Case - Worst Case

I

II

IV

III


2 riding the yield curve

2. Riding The Yield Curve


2 riding the yield curve1

2. Riding The Yield Curve

The strategy applies to

this portion of the yield curve


Assumption you have money to invest for two years only

Assumption: You Have Money To Invest For Two Years Only

  • Option A: Invest in a 1-Year T-Bill at 6%, then roll it over for a second year (at the then-available rate)

  • Option B: Invest in a 2-year T-note at 7%

  • Option C: Invest in a 3-year T-note at 8% and sell it after 2 years


2 riding the yield curve2

2. Riding The Yield Curve


Assuming no shift in the yield curve

Assuming No Shift in the Yield Curve:

  • Option A yields a 6% return

  • Option B yields an 7% return

  • Option C (riding the yield curve) yields a 9.8% return. (Return = 1.8% price increase plus 8.0% current yield.)


3 bond swaps

3. Bond Swaps


Bond swaps pure yield pickup and substitution swaps

Bond Swaps (Pure Yield Pickup and Substitution Swaps)


Passive bond strategies

Passive Bond Strategies


Passive bond strategies1

Passive Bond Strategies

  • Ladder Strategy

  • Barbell Strategy

  • Immunization

  • Dedicated Cash Flow


1 ladder strategy

1. Ladder Strategy


1 ladder strategy1

1. Ladder Strategy


2 barbell strategy

2. Barbell Strategy


2 barbell strategy1

2. Barbell Strategy


A tilt is possible but then you are speculating

A Tilt Is Possible, But Then You Are Speculating


3 immunization

3. Immunization


3 immunization1

3. Immunization

  • “Locks in” a guaranteed rate of return

  • Exactly offsets the change in price with the change in reinvestment income.

  • The point of immunization is where: Time Horizon = Average Duration


4 dedicated cash flow strategy

4. Dedicated Cash Flow Strategy


4 dedicated cash flow strategy1

4. Dedicated Cash Flow Strategy


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