An analyst manages an active fixed-income fund that is benchmarked to the Bloomberg Barclays US Treasury Index.
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An analyst manages an active fixed-income fund that is benchmarked to the Bloomberg Barclays US Treasury Index. This index of US government bonds currently has a modified portfolio duration of 7.25 and an average maturity of 8.5 years. The yield curve is upward-sloping and expected to remain unchanged. Which of the following is the least attractive portfolio positioning strategy in a static curve environment?
A. Purchasing a 10-year zero-coupon bond with a yield of 2% and a price of 82.035
B. Entering a pay-fixed, 30-year USD interest rate swap
C. Purchasing a 20-year Treasury and financing it in the repo market
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In a static yield curve environment where the yield curve is expected to remain unchanged its essential to consider the impact of different portfolio ...View the full answer
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