A properly diversified bond portfolio should use funds that contain securities with a variety of interest rates, durations, credit qualities, geographies, etc.
The managers also seek bonds with high yields for their duration and credit quality -- say, 50 basis points, or hundredths of a percentage point, more for medium-grade corporate bonds rated single-A or triple-B.
The bullish, periphery-friendly response by the market is unlikely to be a flash in the pan, with Draghi and the ECB back to "whatever it takes" form, risk perceptions for duration and credit should be adjusted downward Here's the full note: ECB: Whatever It Says (pdf) And the BBC has published a handy explainer on forward guidance: Q&A: What is 'forward guidance'?
For example, a prolonged period of low interest rates, of the sort we are experiencing today, can create incentives for agents to take on greater duration or credit risks, or to employ additional financial leverage, in an effort to "reach for yield".
(a) BT balance transfer, PD promotional duration, CCC credit card company and CCC balance is the debt of RBS bank.
Peer-to-peer lending has the potential to offer investors more transparency, less duration and credit risk than traditional options, like high-yield bonds.
This tilt seems to be primarily driven by an increase in duration rather than credit risk and insurers do not seem to increase the credit risk of their bonds as interest rates decline.
Active bond funds have largely outperformed with rising yields over the last 3.5 months & look to be underweight duration & overweight credit.
But the Senate and House bills call for four to six separate studies of up to 30 months' duration of how credit ratings agencies work, how they are compensated and what can be done to make their ratings more relevant to investors.
Furthermore, investors looking for options in a down economy wanted stability, transparency, shorter duration and less credit risk, while maintaining solid returns.
