Strategic Fixed Income Investing – An Insider′s Perspective on Bond Markets, Analysis, and Portfolio Management

<p>Preface xi</p>
<p>Acknowledgments xiii</p>
<p>PART ONE The Investing Environment 1</p>
<p>CHAPTER 1 Expect the Unexpected 3</p>
<p>The Model Has Changed 4</p>
<p>Lessons Learned 4</p>
<p>From Bad to Worse 5</p>
<p>CHAPTER 2 Navigating through Troubled Water 7</p>
<p>Debt Ceiling 8</p>
<p>Triple A: Lost, but Not Forgotten 8</p>
<p>Possible, but Not Probable, Consequences 9</p>
<p>Warning Signs 12</p>
<p>CHAPTER 3 Lessons Learned 15</p>
<p>Patterns Emerge 16</p>
<p>Money Markets 18</p>
<p>Treasury Bills, the Favored Asset Class 20</p>
<p>Municipals Felt the Pain as Well 25</p>
<p>Auction–Rate Markets Were Hit Hard 27</p>
<p>CHAPTER 4 Direction in a Sometimes Directionless Market 29</p>
<p>Finding Direction 30</p>
<p>PART TWO The Fixed Income Investor 35</p>
<p>CHAPTER 5 Define the End Investor 37</p>
<p>Risk 40</p>
<p>Risk–Averse Investor 42</p>
<p>A Problematic Trade? 43</p>
<p>Risk–Taking Investor 44</p>
<p>Define Your Strategy 45</p>
<p>Active Strategy 47</p>
<p>CHAPTER 6 Portfolio Construction 49</p>
<p>Factor 1: Defining Your Risk 50</p>
<p>Factor 2: Aligning Goals 51</p>
<p>Conservative Strategy 54</p>
<p>Moderate Strategy 56</p>
<p>More Aggressive Strategy 56</p>
<p>Factor 3: Portfolio Analysis 59</p>
<p>Reduction of Credit Risk 62</p>
<p>Government Securities 64</p>
<p>Risks to Consider 65</p>
<p>Bottom Line 69</p>
<p>CHAPTER 7 Asset Allocation 71</p>
<p>The Road Map 72</p>
<p>Going Global 76</p>
<p>CHAPTER 8 The Federal Reserve and Central Banks 81</p>
<p>Hawks and Doves 82</p>
<p>The Fed Funds Rate 82</p>
<p>A Short–Term Fixed Income Investor 83</p>
<p>Hooked on Accommodation 83</p>
<p>Deposits with Central Banks 84</p>
<p>What about the United States? 86</p>
<p>FOMC: Look for Clues from the Fed Statement 88</p>
<p>What to Look For from the Fed . . . Clues? 88</p>
<p>FOMC Statement: August 2011 89</p>
<p>QE or Not QE 92</p>
<p>Calming Statements for Investors 93</p>
<p>CHAPTER 9 The Economy and the Markets 95</p>
<p>The Payroll Picture: The Backbone to the Economy 97</p>
<p>Bureau of Labor Statistics Website 97</p>
<p>Inflation: A Fixed Income Investor s Enemy 103</p>
<p>Consumption: America s Fuel 109</p>
<p>The Federal Chairman: The Wizard Himself 110</p>
<p>CHAPTER 10 The Yield Curve 111</p>
<p>The Spread 115</p>
<p>The Money Market Arena 116</p>
<p>The Direction of Rates 118</p>
<p>A Steep Yield Curve 119</p>
<p>A Flat Yield Curve 120</p>
<p>An Inverted Yield Curve 121</p>
<p>Listen to the Curve 123</p>
<p>CHAPTER 11 The Ladder and Why You Need One 125</p>
<p>How It Works 126</p>
<p>The Concept 126</p>
<p>The Goal 129</p>
<p>The Long End Poses Challenges 131</p>
<p>The Front End Is Technical 133</p>
<p>Varieties of Short–Term Strategies 133</p>
<p>The Sweet Spot 134</p>
<p>Liquidity 134</p>
<p>Consistent Coupons 137</p>
<p>Why Is Supply Important? 138</p>
<p>Performance and How to Measure It 140</p>
<p>Low–Turnover Dilemma 141</p>
<p>Success of a Strategy 142</p>
<p>CHAPTER 12 Alternatives to a Traditional Ladder Strategy 145</p>
<p>TIPS: The Other Treasury 147</p>
<p>Break–Even Opportunity 148</p>
<p>Consider MBS Pools of Mortgages 150</p>
<p>Consider Corporate Bonds 151</p>
<p>Floating–Rate Notes 153</p>
<p>What Is LIBOR? 154</p>
<p>A Deeper Look at LIBOR 154</p>
<p>The Bottoming Process 156</p>
<p>CHAPTER 13 Credit Analysis 159</p>
<p>The Agency 159</p>
<p>Credit Analysis: Necessary, Not Optional 160</p>
<p>Credit for a Passive Strategy 161</p>
<p>After the Initial Approval 163</p>
<p>Not All Bonds Are Equal 164</p>
<p>Stay Ahead of the Herd 166</p>
<p>CHAPTER 14 The Four Pillars of Trade Execution 169</p>
<p>The First Pillar: Executed Price 171</p>
<p>The Second Pillar: Dealer Inquiries 173</p>
<p>The Third Pillar: Liquidity 174</p>
<p>The Fourth Pillar: Ease of Transaction 174</p>
<p>CHAPTER 15 There Are No Roadblocks, Just Detours 177</p>
<p>Know What You Own 177</p>
<p>Banking Sector 178</p>
<p>Go with Your Gut! 179</p>
<p>Don t Take It Personally 181</p>
<p>Trapped in Purgatory 182</p>
<p>Index 185</p>