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Portfolio Management: A Market-Class guide to Investment Management by John Bonner, Marcus Rees

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Chapter 11. Bond Selection

OBJECTIVES

1. Understand the principles behind debt valuation, specifically the time value of money and discounted cash flow.

2. Grasp the relationship between a bond’s price and its yields.

3. Learn the core terms to describe bonds.

BOND SELECTION PROCESS

Definition: The bond selection process varies by the type of bonds you include in your investible universe. In the case of corporate bonds, the process would be very similar to the equity selection process described in chapter 10.

In this chapter, bond analysis will be limited to risk-free bonds, specifically US Treasuries. This makes the analysis much easier, since there is much less concern about the US government defaulting on its loans than a corporation (the ...

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