Evaluating Yield Curve Strategies for Bond Portfolio Optimization

As a fixed income portfolio manager at a large institutional investment firm, you have been asked to assess the current state of the yield curve and its implications for the firm’s bond portfolio. The yield curve is currently upward sloping, indicating a normal economic environment, but analysts suggest that interest rates may rise in the near future due to anticipated monetary policy tightening.

In this context, explain how you would evaluate potential yield curve strategies to optimize the performance of the firm’s bond portfolio. Be sure to include specific strategies such as bullet, barbell, and laddered structures, and discuss the advantages and disadvantages of each with reference to the current yield curve shape.