Fixed‐Income Indicators

This chapter explains various aspects of fixed income indicators. The purpose of the iShares Fixed Income portfolio is to identify major themes within the fixed‐income area of the market between different sub‐asset classes. In other words, the model is designed to cull out the strongest areas within fixed income, but it is not designed to take into account absolute risk in the fixed‐income class itself. Within the fixed‐income asset class, the portfolio is expected to attempt to capture the strongest trends and avoid the weakest trends. Relative strength (RS) compares areas within the fixed‐income markets to one another to rank the strongest on an RS basis to weakest on an RS basis. The systematic and rules‐based approach also allows one to eliminate the human or gut feel trades as research has found the more the system is allowed to the work, the better the returns will be.