ETF.com 201 Fixed Income and Bond ETFs

Question 1

Bond Yield Changes

Answer 1

Reflects the coupon rate in relation to changing bond prices. Bond yields take into account the price and coupon rate of the Bond. For example, interest rates go up, Bond prices decrease, and yield goes up to reflect that.

Question 2

Types of fixed income ETFs

Answer 2

Sovereigns, corporate, municipals, broad markets

Question 3

Sovereign ETFs

Answer 3

Fixed income ETFs that track US Treasuries or UK gilts

Question 4

Broad Market ETfs

Answer 4

Fixed income ETFs that track both sovereign and corporate liabilities

Question 5

How does duration affect the interest rate risk of a bond?

Answer 5

The longer the duration or the date to maturity, the greater the interest risk. This is because the longer the length of the debt, the longer it is subject to potential changes in interest rates.

Question 6

Duration value interpretation (ex: duration value of 4.3)

Answer 6

A duration of 4.3 means that with a 1% increase in an interest rate will lead to a 4.3% decreased in the price of a bond. This isn’t the case in reality. You can have different values of interest rate changes.

Question 7

lien

Answer 7

A right to keep a possession of someone else until they pay off their debt. Senior loans are backed by these.

Question 8

Libor

Answer 8

Benchmark rates that banks charge each other for short-term loans. (Stop article fixed income ETFs what happens during bond panics
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