Investment Planning: Bond Portfolio

The bond investment program that should be sought by the Leadbetters is one that will provide an optimal long-term yield within the context of risk. The yield curve is the popular name for the term structure of interest rates. It is a static function that relates (1) term to maturity to (2) yield to maturity at (3) any given time point. The yield curve represents a cross section of yields for a category of bonds that are comparable in all respects but maturity.

Yield curves for different securities have different shapes. While yield curves per se are static in nature, their behavior over time is quite fluid! As a result, the shape of the yield curve can undergo dramatic alterations. There are four basic patterns, or shapes, of the yield curve·ascending, declining, humped, and flat.

An ascending, sometimes called rising, yield curve is the most common. This pattern occurs when the yields on short-term securities are lower than those for long-term securities, are projected

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Approximate Word count = 711
Approximate Pages = 3 (250 words per page)

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