Empirical analysis of US bond market

Abstract

This dissertation provides a comprehensive analysis of U.S. fixed income instruments over the past decade, focusing on their performance and the implications for investment strategies. The study examines various types of fixed income securities, including Treasury securities, corporate bonds, and municipal bonds, analysing their risk-return profiles and the impact of significant economic events such as the COVID-19 pandemic. Utilizing data from Bloomberg Terminal, the research employs descriptive statistics, regression analysis, correlation coefficients, and event-based analysis to assess the performance of U.S. fixed income instruments relative to their U.K. counterparts.

The findings reveal distinct performance trends across different bond indices, highlighting the superior stability of U.S. Treasuries and the higher returns, albeit with increased volatility, of corporate bonds. The study also uncovers a moderate positive correlation between U.S. and U.K. bond markets, suggesting partial synchronization influenced by global economic conditions. Furthermore, the event-based analysis demonstrates significant shifts in bond prices and coupon rates during the pandemic, underscoring the importance of dynamic asset allocation in volatile market environments.

This research contributes to the field of investment management by providing evidence-based insights into the strategic role of fixed income instruments in diversified portfolios. It offers valuable guidance for investors seeking to optimize their asset allocation, particularly in the context of risk management and the pursuit of stable, predictable returns.