Fixed Income
Educational articles about fixed income.
Subcategories
Bond Market Fundamentals
16 articles
Yield Duration and Convexity
18 articles
Government and Sovereign Debt
6 articles
Corporate and High-Yield Strategies
8 articles
Municipal and Tax-Advantaged Bonds
20 articles
Credit Markets and Analysis
11 articles
Structured Products and Securitization
5 articles
Fixed Income Portfolio Management
20 articles
Articles
Rebalancing Rules for Bond Allocations
# Rebalancing Rules for Bond Allocations Bond allocations drift. Duration changes as bonds age, credit quality shifts with issuer fundamentals, and m...
Managing Liquidity Buckets
# Managing Liquidity Buckets Liquidity looks free until you need it. **Fixed income funds suffered 12% outflows in a single month during March 2020**...
Incorporating Inflation-Protected Securities
# Incorporating Inflation-Protected Securities TIPS (Treasury Inflation-Protected Securities) solve a problem most bond investors ignore until it cos...
Glossary: Portfolio Management Terms
Fixed income portfolio management uses specialized terminology that practitioners take for granted. This glossary defines the essential terms, organiz...
Reporting Standards for Fixed Income Clients
The point is simple: **performance numbers without context are meaningless, and context without standards is marketing.** This is why the Global Inves...
Integrating ESG Screens into Bond Portfolios
ESG screening in fixed income excludes or underweights bonds from issuers that fail environmental, social, or governance criteria. The Bloomberg MSCI ...
Global Diversification for US Investors
Global bond diversification adds exposure beyond US Treasuries and corporates—but the currency decision often matters more than the bond selection. Du...
Performance Attribution Frameworks
Performance attribution in fixed income separates luck from skill by decomposing excess returns into **duration positioning**, **sector allocation**, ...
Operational Considerations for SMA vs. Fund
The point is not that one structure is universally better. The point is that **SMA vs. fund is an operational question with tax consequences, not a ph...
Monitoring Legislative Risk for Tax Changes
Municipal bond tax exemption isn't constitutional bedrock. It's legislative policy that Congress can modify or eliminate with a single vote. The point...
Using SMAs vs ETFs for Municipal Exposure
The choice between separately managed accounts and ETFs for municipal exposure isn't just about fees. It's about understanding which wrapper structure...
Measuring Tracking Error for Bond Managers
Tracking error is the metric that separates skilled active management from accidental deviation. A bond manager running **75 bps tracking error** agai...
Credit vs. Rate Risk Budgeting
Every fixed income portfolio carries two distinct risks that can either diversify or compound. **Rate risk** (duration exposure to Treasury yield chan...
Using Interest Rate Swaps in Bond Portfolios
Interest rate swaps are the workhorse derivative for institutional bond managers. A pension fund that needs **15-year duration** to match liabilities ...
Disclosure Requirements and EMMA Filings
# Disclosure Requirements and EMMA Filings **Intermediate** | Published: 2025-12-29 ## Why It Matters Unlike corporate bonds (where SEC requi...
Credit Analysis for State vs. Local Issuers
# Credit Analysis for State vs. Local Issuers **Intermediate** | Published: 2025-12-29 ## Why It Matters The municipal bond market contains *...
AMT-Subject Municipal Bonds
# AMT-Subject Municipal Bonds **Intermediate** | Published: 2025-12-29 ## Why It Matters Most investors assume all municipal bonds are tax-fr...
Monitoring Counterparty Risk in Derivatives
The point is straightforward: **your swap can work perfectly and still blow up your portfolio** if the counterparty defaults. This is not abstract ris...
Tax-Equivalent Yield Calculations
# Tax-Equivalent Yield Calculations Municipal bond yields look lower than taxable alternatives, but the comparison is meaningless without adjusting...
Understanding Bond Insurance and Enhancements
# Understanding Bond Insurance and Enhancements Bond insurance transforms municipal credit by substituting an insurer's AA rating for the underlyin...
Essential Service Revenue Streams
# Essential Service Revenue Streams Water, sewer, and electric utilities represent the backbone of municipal revenue bond credit quality, yet inves...
General Obligation vs Revenue Bonds
# General Obligation vs Revenue Bonds General obligation and revenue bonds represent the two fundamental structures in municipal finance, but the d...
Infrastructure Financing via Municipal Bonds
**America's infrastructure runs on municipal bonds.** Of the **$4.2 trillion** in outstanding municipal debt, a substantial portion finances the roads...
Build America Bonds: History and Lessons
**Build America Bonds represented the most significant innovation in municipal finance in decades.** Between April 2009 and December 2010, state and l...
State-Specific Fund Strategies
**State-specific municipal bond funds offer a compelling tax advantage—if you live in the right state.** For investors in high-tax states like Califor...
Liquidity Considerations in Municipal Bonds
**Municipal bonds trade in a fundamentally different market than Treasuries or corporates.** With over **1 million CUSIPs** from **50,000 distinct iss...
Hedging Duration with Treasury Futures
The point is efficiency: Treasury futures let you adjust portfolio duration without selling bonds. Need to reduce rate exposure before an FOMC meeting...
Cash Flow Matching for Institutional Needs
# Cash Flow Matching for Institutional Needs Cash flow matching—also called **dedication**—constructs a bond portfolio where the coupons and principa...
Refundings and Escrowed-to-Maturity Issues
# Refundings and Escrowed-to-Maturity Issues When a municipality refinances debt, your bond changes in ways that most investors miss entirely. The ...
Default Case Studies in the Municipal Market
# Default Case Studies in the Municipal Market Municipal bond defaults remain rare events (Moody's reports a **0.0420% ten-year cumulative default ...
Core vs. Core-Plus Strategy Design
The point is structural: core strategies prioritize stability and benchmark tracking; core-plus strategies accept higher tracking error in exchange fo...
Glossary of Municipal Bond Terms
Municipal bonds carry specialized vocabulary that creates barriers for new investors. This glossary defines the **30 essential terms** you'll encounte...
Overlay Strategies with Futures and Options
# Overlay Strategies with Futures and Options An overlay strategy adds a derivative position **on top of** an existing portfolio to modify its risk c...
Liability-Driven Investing Basics
The point is simple: if you owe money in the future (pension benefits, insurance claims, annuity payments), your investment strategy should focus on m...
Territorial Bond Lessons for Investors
Puerto Rico's debt crisis restructured **$33 billion in bonded debt** and **$55 billion in pension liabilities** between 2015 and 2022. The territory ...
Portable Alpha Concepts in Fixed Income
# Portable Alpha Concepts in Fixed Income Portable alpha—the technique of separating **beta exposure** (market returns) from **alpha generation** (ex...
Barbell vs. Bullet vs. Ladder Approaches
The point is straightforward: how you distribute maturities across a bond portfolio determines your exposure to rate moves, liquidity constraints, and...
High-Yield Municipals and Credit Work
High-yield munis sit in a peculiar corner of fixed income. They offer tax-exempt income (often yielding **4-6% federally tax-free**) with stronger cov...
Glossary: Yield and Duration Metrics
# Glossary: Yield and Duration Metrics This glossary defines the essential yield, duration, and convexity terms every fixed income investor needs to ...
Stress Testing Portfolios for Rate Shocks
# Stress Testing Portfolios for Rate Shocks Most bond investors discover their true risk exposure the hard way. The 2022 drawdown taught this lesson ...
Forward Rate Derivation from the Curve
**Forward rates are implied future interest rates extracted from today's spot curve.** They answer a specific question: "What short-term rate does the...
Barbell vs. Bullet Strategies Under Curve Shifts
**Two portfolios with identical duration can produce wildly different returns.** The barbell strategy (concentrating in short and long maturities) and...
Breakeven Inflation and Real Yields
**The Treasury market constantly broadcasts an inflation forecast.** The 10-year breakeven inflation rate currently sits at **2.22%**, while the 10-ye...
Interpreting Steepeners and Flatteners
**Steepeners and flatteners are curve bets, not duration bets.** You're wagering on how the gap between short and long rates will change, not whether ...
Reporting Duration and Convexity in Fact Sheets
**Fact sheets lie by omission.** In 2022, bond funds dutifully reported their duration figures—but most investors never connected those numbers to act...
Using Futures and Swaps to Adjust Duration
**Duration adjustment without selling bonds is the mark of an efficient fixed income manager.** Futures overlays and interest rate swaps let you chang...
Understanding Treasury Yield Curve Shapes
**The yield curve has predicted every U.S. recession since World War II.** When the 2-year/10-year spread inverted in July 2022, it stayed negative fo...
Modified Duration and Price Sensitivity
**Duration errors cost real money.** In 2022, the Bloomberg U.S. Aggregate Bond Index carried a duration of **6.0 years** versus its long-term average...
Duration Matching for Liability Immunization
**Duration matching is the core discipline of liability-driven investing.** When assets and liabilities have the same duration, parallel interest rate...
Effective Duration for Callable Bonds
**Using modified duration on callable bonds can miscalculate your hedges by 20-40%.** The problem: modified duration assumes fixed cash flows, but cal...
Dollar Duration and DV01 Basics
**Duration tells you percentage sensitivity. DV01 tells you dollar sensitivity.** That distinction matters the moment you manage real money. A portfol...
Negative Convexity and Mortgage Securities
--- title: "Negative Convexity and Mortgage Securities" description: "Why MBS prices cap gains when rates fall and extend losses when rates rise. Ma...
Understanding Fixed Charge Coverage Tests
Fixed charge coverage ratio (FCCR) covenants are the early warning system that **45% of leveraged borrowers are currently failing**. When FCCR drops b...
Credit Spread Components and Drivers
**Intermediate** | Published: 2025-12-29 ## Why Credit Spread Decomposition Matters Credit spreads are not one thing. They contain at least thre...
Top-Down vs. Bottom-Up Credit Research Workflow
Starting credit research from the wrong direction cost analysts dearly in 2008. Researchers who built beautiful issuer-level models for Lehman, Bear S...
Covenant Quality and Protections
**Difficulty:** Intermediate **Published:** 2025-12-29 Covenant-lite loans now represent **91% of outstanding US leveraged loans** ($1.29 trillion...
Credit Default Swaps as Market Signals
Credit default swaps (CDS) function as the bond market's real-time stress detector. When Credit Suisse CDS spreads jumped **36 bps in a single day** t...
Day-Count Conventions and Settlement Cycles
Using the wrong day-count convention on a $100,000 corporate bond position creates **$200-500 in calculation errors**—small individually, material whe...
Primary Issuance vs. Secondary Trading Workflows
Where you buy bonds matters more than most investors realize. Purchasing in the **primary market** (new issuance) versus the **secondary market** (exi...
Investment Grade vs. High Yield: The Line That Separates Measured Risk from Speculation
The BBB/BB boundary—one notch on a rating scale—separates **0.3% annual default rates from 1.5%**, a 5x difference that determines whether you're coll...
What Is a Bond? Coupons, Par, and Accrued Interest
Buying a bond between coupon dates without understanding accrued interest means you pay **more than the quoted price**—often $125-250 extra per $10,00...
Coupon Types: Fixed, Floating, and Step-Up
Choosing the wrong coupon structure in a rising rate environment cost fixed-rate holders **15-20% in 2022**—while floating-rate investors lost less th...
Callable, Putable, and Convertible Bonds
Embedded options transfer risk between issuers and investors. When you buy a callable bond, **you're short an option you didn't price**. When rates dr...
Analyzing Debt Maturity Walls
**Intermediate** | Published: 2025-12-29 ## Why Maturity Walls Break Portfolios Debt maturity walls are not abstract credit concepts. They show ...
Reading Bond Quotes and Price Conventions
Misreading a bond quote costs real money. Confuse clean price with dirty price and you pay **$15-25 more per $1,000 face value** than you expected (th...
Leverage, Coverage, and Cash Flow Ratios
Credit ratios show up in bond portfolios as **pricing signals you either exploit or ignore at cost**. Every **1x increase in Debt/EBITDA above 4x** co...
Default Probability and Recovery Rate Basics
When a bond defaults, you don't lose everything. Senior secured bondholders historically recover **50-60 cents** on the dollar; subordinated debt hold...
Distressed Debt Restructuring Paths
The restructuring path you choose determines more than timeline—it determines recovery. Prepackaged bankruptcies resolve in **45-60 days** with **70%+...
Treasury vs. Corporate vs. Agency Markets Overview
**Beginner** | Published: 2025-12-29 ## Why Market Segment Selection Matters The US bond market totals **$58 trillion**, but that number obscure...
Who Trades Bonds? Dealers, Platforms, and Investors
Retail investors pay **0.5-1.5%** in transaction costs on typical bond trades. Institutions pay **0.05-0.15%**. That's a **5-10x cost disadvantage** b...
How Credit Ratings Are Assigned at Issuance
Rating agencies predicted the 2008 financial crisis with stunning inaccuracy: **over 36,000 structured finance tranches were downgraded** in 2007-2008...
Understanding Bond Indentures and Covenants
The fine print in your bond investment determines whether you recover **72 cents** on the dollar in default or just **61 cents**. That **11-percentage...
Nominal Yield, Current Yield, and Yield to Maturity
--- title: "Nominal Yield, Current Yield, and Yield to Maturity" description: "Learn when to use nominal yield, current yield, and YTM for bond comp...
Yield to Call and Yield to Worst
--- title: "Yield to Call and Yield to Worst" description: "Learn why yield to worst is your true planning yield for callable bonds, and how to avoi...
Spot Curves vs. Par Curves
--- title: "Spot Curves vs. Par Curves" description: "Master the difference between spot rates and par yields. Learn bootstrapping mechanics, pricin...
Convexity: Concept and Calculation
--- title: "Convexity: Concept and Calculation" description: "Master convexity to improve bond price estimates beyond duration. Learn the calculatio...
Key Rate Duration to Measure Curve Risk
**Effective duration assumes all rates move in lockstep.** They don't. In the 2013 Taper Tantrum, the 10-year yield surged **150 basis points** while ...
Macaulay Duration Calculation Walkthrough
# Macaulay Duration Calculation Walkthrough **Summary:** Duration tells you the weighted average time until you receive a bond's cash flows. This w...
How Credit Ratings Are Assigned at Issuance
Credit ratings at issuance function as both a market calibration tool and a regulatory requirement, directly influencing a bond’s yield spread, liquid...
What Is a Bond? Coupons, Par, and Accrued Interest
Bonds anchor institutional portfolios, yet their cash flow structures create persistent workflow tensions between yield optimization and risk manageme...
Odd-Lot Trading and Liquidity Considerations
In fixed income markets, liquidity is both a currency and a constraint. Unlike equities, bond transactions often occur in over-the-counter markets whe...
Yield Spreads and Benchmark Selection
Yield spreads are the lifeblood of fixed income analysis, quantifying the extra return demanded for taking on additional risk. A 150 bps spread on a B...
Treasury vs. Corporate vs. Agency Markets Overview
Bond markets represent over $40 trillion in global assets, yet institutional investors face a persistent tension: balancing yield potential against cr...
Leveraged Loans vs. High-Yield Bonds
Institutional investors allocating to corporate credit face a fundamental tension: balancing covenant protection with liquidity. Leveraged loans and h...
Glossary: Securitization Terms
Securitization transforms illiquid assets into tradable bonds, but its complexity creates a workflow tension: balancing transparency with the need for...
Extension Risk in Rising Rate Environments
In rising rate environments, extension risk emerges as a critical vulnerability for structured products and securitizations. As benchmark rates climb,...
Prepayment Models: PSA and CPR
Prepayment modeling is the backbone of structured credit analysis. For mortgage-backed securities (MBS), cash flow uncertainty from borrower behavior ...
Pass-Through Prepayment Behavior
Pass-through securities derive value from predictable cash flow streams, but prepayment behavior introduces volatility that distorts projected returns...
Collateralized Mortgage Obligations Tranches
Structured products demand precision in balancing risk mitigation and return enhancement. In mortgage securitization, the tension between cash flow pr...
529 Plan-Linked Municipal Securities
Tax-advantaged bonds face dual pressures: regulatory shifts eroding traditional muni yields while investor demand for education-aligned strategies gro...
Evaluating Hospital, Education, and Transportation Deals
# Evaluating Hospital, Education, and Transportation Deals Municipal revenue bonds in healthcare, education, and transportation share a common trai...
Coupon Types: Fixed, Floating, and Step-Up
Coupon structures define a bond’s cash flow profile and risk-reward tradeoffs. For institutional investors, selecting between fixed, floating, and ste...
History of Yield Curve Inversions
Yield curve inversions have correctly signaled seven of nine post-1955 U.S. recessions, making them a non-ignorable red flag for sovereign debt invest...
TreasuryDirect Account Tips
Institutional investors managing government debt portfolios face a critical tension: balancing execution speed with regulatory compliance in TreasuryD...
Sovereign Credit Ratings and Outlooks
Sovereign credit ratings are the linchpin of government debt valuation, directly influencing borrowing costs, investor allocations, and macroeconomic ...
Link Between Fiscal Policy and Treasury Supply
Fiscal policy and Treasury supply are inextricably linked through government spending, taxation, and debt management decisions. For institutional inve...
Federal Reserve Balance Sheet and QE Impacts
The Federal Reserve's balance sheet serves as a central lever for global liquidity, directly influencing sovereign debt yields, currency valuations, a...
Treasury Auction Calendar and Mechanics
Treasury auctions allocate $80 billion in daily U.S. government debt, setting benchmarks for global fixed income markets. For institutional investors,...
Liquidity Considerations in Corporate Bonds
Corporate bond liquidity is a latent risk factor that crystallizes during market stress, often amplifying losses beyond credit fundamentals. Instituti...
Analyzing Covenant Packages in New Deals
Covenant packages in corporate and high-yield deals act as financial tripwires, but their design creates a perpetual tension: stronger protections oft...
Credit ETFs and Creation/Redemption Mechanics
Corporate and high-yield credit ETFs serve as critical tools for managing illiquid bond exposures, yet their value hinges on seamless creation/redempt...
Impact of Fed Policy on Credit Spreads
Fed policy changes are the single largest driver of credit spread volatility in Corporate and High-Yield markets. A 100 bps shift in Fed funds rates t...
Liquidity Buckets Within Corporate Debt Funds
Corporate and high-yield debt funds face a persistent trade-off: maintaining sufficient liquidity to meet redemptions while avoiding the yield drag of...
Make-Whole Call Provisions Explained
Corporate and high-yield bond investors face a persistent tension: issuers’ incentive to refinance when rates fall versus investors’ expectation of st...
Green and Sustainability-Linked Bond Issuance
Green and sustainability-linked bonds (SLBs) now constitute 15% of global corporate issuance, driven by institutional demand for ESG alignment. For Co...
Covenant-Lite Loans: Risks and Rewards
Covenant-lite loans now comprise 40-50% of new U.S. high-yield loan issuance, reflecting borrower and lender incentives to bypass traditional financia...