Fixed Income and Alternative Investment Analysis 2022

Running head: FIXED INCOME AND ALTERNATIVE INVESTMENT
Fixed Income
Name of the Student:
Name of the University:
Author’s Note:

BOND PORTFOLIO1
Table of Contents
Introduction......................................................................................................................................2
Discussions......................................................................................................................................3
Bond Analysis..............................................................................................................................4
Portfolio Construction.................................................................................................................7
Conclusion.......................................................................................................................................9
Bibliography..................................................................................................................................10

BOND PORTFOLIO2
Introduction
The employee defined benefit pension plan would be set up by using the for a duration of
10 years, whereby the amount of pension fund for the company would be around $10 million and
the proceeds would be invested in the fixed income section whereby corporate, government,
agency and municipal bond would be the key broad classes where the investment will be done in
the portfolio. The investment in bonds that would be selected for the purpose of analysis will be
corporate, government, agency and municipal bonds that would be included in the portfolio. The
key investment criteria that has been placed for the purpose of investment will be that the fund is
expected to payout starting five-years from now. The other key investment criteria that has been
placed for the purpose of bond investment would be that the bond selected should be less volatile
or particularly should be less correlated with the interest rate movement1. The market condition
prevailing in the US Bond market has been predominately determined with the help of the
movement in the interest rate and the condition of the bond market. The Aggregate US Bond
Market in total has given a return of around 4.62% and the return generated by the major bond
markets and stock indices considered for comparison purposes are as follows:
 Long-Term U.S Corporate Bond: 6.97%
 Long-Term U.S Government Bonds: 6.78%
 Investment Grade Corporate Bonds: 5.49%.
 Barclays U.S. Aggregate Bond Index 4.62%.
It is accordingly important to determine the interest rate movement in the US market as it is
important to note that the interest rate and bond market is inversely correlated. Accordingly,
1 GmbH, finanzen.net. "BONDS | BOND MARKET | PRICES | RATES | Markets Insider."
markets.businessinsider.com. N. p., 2019. Web. 12 Oct. 2019.

BOND PORTFOLIO3
when new bonds are issued in the market they typically carry coupon rates which are close or
linked to the prevailing market interest rates. Interest rates prevailing and the bond market in
the economy is comparatively have an inverse relationship so if one of the factor goes up the
other would go down. The interest rate movement in the US economy can be well shown
below whereby in the five year trend period interest rate particularly has increased to around
1.75%-2.00%. However, at the same time the Federal Reserve in the fed fund meet lowered
the target range it actually sets to be around 1.75%- 2.00%. The rate cut done by the Federal
Reserve is primarily due to the subdued inflation rate and the rising concerns towards the
economic outlook and ongoing trade war between US and China.
Discussions
The data analysis would be done for the bond market by evaluating the overall bond
market and the associated bonds that has been selected for the purpose of analysis. The total