Liquidity Management in Fixed Income Portfolios

As the fixed income portfolio manager at a mid-sized asset management firm, you are tasked with evaluating and managing the liquidity of your portfolio. Your firm has recently experienced an increase in investor redemptions due to market volatility, prompting a re-assessment of the portfolio's liquidity strategy.

Current holdings include a mix of government bonds, corporate investment-grade bonds, and municipal bonds. These securities exhibit varying levels of liquidity based on their market depth and trading volumes. Additionally, your company has access to a line of credit, which was previously untapped.

Discuss the key factors you should assess in managing the liquidity of your fixed income portfolio, including how you would approach decisions regarding the sale of securities, access to cash, and maintaining liquidity reserves. Additionally, include strategies to improve liquidity without compromising the portfolio's overall risk/return profile.