Bond Strategies

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# Bond Strategies - PowerPoint PPT Presentation

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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## PowerPoint Slideshow about 'Bond Strategies' - lazarus

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Presentation Transcript

### 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
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
• 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
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.)

### Passive Bond Strategies

Passive Bond Strategies