Fixed income and just a little tired.

CFA Level III Fixed Income
#1

One more question for today and then I’m done.

Looking at sector/quality enhancements where we over/underwiegh specific sectors over business cycle.

It says

Increase allocation to treasuries over corporates when spread widening anticipated.

II have my own ideas why this might be true but I’m not sure. Can somebody explain this.

Thanks.

#2

spread = yield on corporate - yield on treasury.

widening spread => corporate yield increasing

which means corporate bond is reducing in price.

so decrease allocation to corporate bonds

#3

Thanks

#4

Thanks. Day of tired FI reading coming together.