Reading 29: Fixed Income Portfol....ement - Part II－LOS g excess, return

tycoon

CFA Institute Area 8-11, 13: Asset Valuation
Session 9: Portfolio Management of Global Bonds and Fixed Income Derivatives
Reading 29: Fixed Income Portfolio Management - Part II
LOS g: Evaluate the sources of excess return for an international bond portfolio.

tycoon

One way that international bond portfolio managers attempt to enhance portfolio returns is to correctly anticipate interest rate and yield curve changes. This strategy is called:

A) sector selection.

B) duration management.

C) bond market selection.

D) currency selection.

---

Answer and Explanation

With duration management, bond portfolio managers are able to increase returns by correctly forecasting interest rate shifts and changes in the shape of the yield curve. By correctly estimating these changes, the bond manager can capitalize on the inverse relationship between interest rate changes and the market value of bond issues.

With duration management, bond portfolio managers are able to increase returns by correctly forecasting interest rate shifts and changes in the shape of the yield curve. By correctly estimating these changes, the bond manager can capitalize on the inverse relationship between interest rate changes and the market value of bond issues.