Bond Indicators for 2023
Abstract
Understanding the changes in bond prices and their relationship to other economic indicators can help us make two vital decisions when allocating a fixed-income portfolio. First is credit quality, which can be gauged by changes in the investment grade option-adjusted spread (IG OAS) or the high yield option-adjusted spread (HY OAS). The second decision is duration, which adjusts the interest rate risk within the portfolio. Duration decisions can be informed by movements of the 10-year Treasury yield, Bank Prime Loan Rate, and the 10-Year Breakeven Inflation Expectation. Based on our backtests and qualitative research from other sources, we have identified nine indicators that can educate how one might allocate a fixed-income portfolio in any given market environment.
About the Author
Brandon Bertnick
Brandon is an undergraduate student at California State University, Fullerton. He is majoring in Business Administration with a concentration in Finance. At Hoskin Capital, he specializes in fixed-income research. In his free time, Brandon likes to cook, garden and maintain a healthy lifestyle.