This is the process of analysing and forecasting the trend of interest rates and then establishing an average term to maturity for the bond portfolio which will maximize the return - should the forecast prove correct. Anticipation of rising interest rates would dictate shortening the average term to maturity whereas an environment of declining interest rates would likely provide the greatest opportunity at the long end of the market. Pure interest rate anticipators would likely invest only in the highest grade bonds available because their analysis does not include credit risk. Typically interest rate anticipators are not active traders.
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