What is the difference between various fixed income indexes?
Just as equity indexes are based on different combinations of stocks (for example, the Standard & Poors 500 versus the Russell 2000), fixed income indexes are based on different combinations of fixed income securities. Generally, these fixed income indexes can represent various maturity ranges, bond ratings, or liquidity characteristics. For example, the Lehman Brothers 1-3 Year Treasury Index is a capitalization-weighted combination of publicly-issued, fixed-rate US Treasury securities (non-convertible) that have more than $150 million par value outstanding and maturities from one to three years. Since the underlying indexes represent various characteristics, investors with a view on the yield curve can make applicable investments.
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