The Bank Bill Swap Rate, commonly known as BBSW, is the most common measure of short-dated interest rates in Australia. Strictly speaking, it is the rate at which Australia’s prime banks borrow money for short periods, like three months or six months. BBSW is normally near, but just above, the RBA cash rate.
In this article we focus on the benefits of diversification and why creating a more diversified portfolio helps mitigate risk in your fixed income portfolio.
Diversification is the easiest way to smooth volatility in a portfolio and therefore it has been brought sharply to the forefront of investors’ minds. Now is the perfect time to assess both the make-up of your portfolio and risk exposure within the portfolio.
Trade opportunities
We've updated our Sample Portfolios for the month.
To get the most out of bond investments, it is necessary to review your portfolio periodically. While your FIIG Relationship Manager can help you with this at any time, each year a number of FIIG client portfolios receive a centrally generated, formal Portfolio Scorecard. With those annual scorecards having recently been sent, it’s timely to talk about how to get the most out of a portfolio review.
Events during the life of a bond can give the investor a chance to re-evaluate the position and make sure that the original thesis for investment still holds.
Trade opportunities
We've updated our Sample Portfolios for the month.
Trade opportunities
We've updated our Sample Portfolios for the month.
In the final article of the series, we round out the rest of the risks we typically consider, being which includes liquidity and foreign exchange (FX), as well as look at how to appropriately size the various positions of each bond within the portfolio.
In this second article of the series we will delve into the two main risks faced by bond investors – the risk of not being paid back – or credit risk – and the risk of the market price of your bond investment moving due to a change in the interest rate or yield of the bond – called interest rate risk.