In schweser as well as CFAI there’s a statement re: “Return due to the change in forward rates”. It states: Return due to the interest rate environment is made up on analyzing the term structure of a universe of treasury securities (I get this part but can’t decipher the next) and can be further separeted into the return from the implied forward rates (expected) and the difference in returns between the actual returns and the returns from the market implied return from the forward rates (unexpected return)" What does this REALLY mean? Thx
The total return on a T-bond you buy and hold is two parts: The return based on the current spot rate curve when you buy the bond: Return expected based on the current implied forward rates (you calculate from the Treasury spot rate curve via bootstrapping). Plus an unknown part you can only calculate once you sell the bond ( can be additional unexpected return or negative return) These two parts have nothing to do with active management, that’s the return on a T-bond you buy and hold.
Huh…it indeed helped…i see it better now thank you!