Financial Services / Asset Management

Fixed Income Management

Our five steps towards implementation

At APS Financial, we believe that fixed income securities should be used to protect principal during periods of stock market volatility. We also employ these securities to take advantage of periods when bond returns are most likely to outperform stocks.

Step 1
Interest Rate Anticipation
In managing assets we analyze the following four factors:

• Current economic situations & trends
• Current monetary & fiscal policy
• Expected rate of inflation
• Consumer sentiment

Using this information, we formulate our forecast for the direction of interest rates over the next six to twelve months.

Step 2
Duration Weighting
We structure each portfolio to take advantage of the current interest rate environment.

If we believe interest rates are going to decline, we structure our portfolio to be at the longer end of the client's benchmark. If we believe that interest rates will go up, we structure our portfolio to be at the shorter end of the benchmark. When interest rates are flat, we take a neutral approach to duration, and purchase securities with higher income flows.

Step 3
Yield Curve Analysis

We use a yield curve analysis and our analysis of the future direction of interest rates to determine the make-up of each portfolio. When the yield curve is steep on an historical basis, we will exaggerate minimum and maximum maturities to average out to a target benchmark. This allows the portfolio to take advantage of this condition. When the yield curve is flat, we will concentrate our maturities in the "cheapest" part of the yield curve. When the yield curve is normal, we will use multiple maturities to provide a continuous flow of income and maturing issues, and to avoid issues as interest rates change.

Step 4
Sector Spread Analysis
We compare current yields and prices across many sectors, including:

• US Treasuries
• Agencies
• Corporates
• Municipals
• Mortgage backed

We look at historical spread relationships. If yield spreads dictate a change, we will move from US Treasury securities into securities offering a more favorable reward and risk tradeoff.

Step 5
Portfolio Monitoring
We monitor portfolios to take advantage of changes in the shape of the yield curve and changes in credit quality. We also look for any anomaly present in the fixed income markets.

Our approach to fixed income is a focused, flexible style. With this focus, we continue to provide a high level of consistent value-added returns beyond the client specified indices.

If you'd like to discuss your investment needs, contact one of our professionals.