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Building a Bond Portfolio

In: Business and Management

Submitted By aleksanv
Words 9379
Pages 38
GEST-S411

Investments in a historical perspective

Building a Bond Portfolio

Vitalij Aleksandrov

Gerard Haughey

CONTENTS

➢ PART 1

❖ What are bonds?

❖ What types of bonds exist

❖ Tools of analysis

➢ PART 2

❖ Characteristics of a good bond portfolio

❖ Choosing a portfolio strategy

❖ Management of a bond portfolio

➢ PART 3

❖ Creation of our portfolio

❖ Selection of bonds

▪ Analysis of issuer

▪ Technical analysis

▪ Expectations (including risks)

▪ Investment decision

❖ Investment summary

❖ Performance analysis

❖ Effects of crisis on the bonds chosen

➢ BIBLIOGRAPHY

PART 1

What are bonds?

In the same way that people borrow money, companies and governments also need to borrow money. A company needs to fund its expansion, conduct market research, develop new products etc., and the problem large corporations encounter is that they need more money than any single bank can provide. This is particularly the case with governments who need to fund everything from infrastructural projects to securing bank loans. Because they can’t borrow large sums from banks they must turn to the public market and raise money by issuing bonds.

A bond is a fixed income security or a loan given by the bondholders (individual investors) to the issuer (a company or a government). To incentivize people to invest their own money, an added return over the amount lent must be offered in the form of interest payments, known as coupons. The indenture is the contract between the issuer and the bondholder, setting out all of the obligations of the issuer, e.g. the coupon rate, coupon frequency, maturity date, price, and others (Fabozzi, 2012)....

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