Fundamentals of Fixed Income Portfolio Management

This chapter introduces fundamental concepts and terminology for fixed income portfolio management in practice. It reviews the sectors of the bond market, basics of fixed income analytics:yield, duration, convexity; and major sources of risk for bond investors; concluding with a description of the spectrum of bond portfolio strategies. The chapter also reviews the fundamental fixed income terminology, including features of fixed income securities: term to maturity, maturity, coupon rate, par value, yield, provisions for paying off bonds, and bondholder option provisions; as well as major sources of risk for a bond investor. Important fixed income analytics concepts for measuring bond portfolio risk, including duration, convexity, key rate duration, and spread duration, are discussed next. The major sectors of the U.S. bond market are the Treasury securities market, corporate bond market, municipal bonds market, and non-U.S. bond market.