Fixed-income instruments include a broad range of publicly traded securities (such as commercial paper, notes, and bonds traded through exchanges as well as OTC) and non-publicly traded instruments (such as loans and private placements). Individual loans or fixed-income obligations may be bundled into a pool of assets supporting such instruments as asset-backed securities and covered bonds.

Fixed-income portfolio managers combine these diverse instruments across issuers, maturities, and jurisdictions to meet the various needs of investors. We discuss the different roles of fixed-income securities in portfolios and explain the two main types of fixed-income mandates—liability-based mandates and total return mandates—as well as bond market liquidity. We also provide an overview of portfolio measures, instruments, and vehicles used in fixed-income portfolio management and introduce a model of how a bond position’s total expected return can be decomposed.