Liquidity Management in Fixed Income Portfolios

Very Easy Managing Fi Portfolios Liquidity Management

As a fixed income portfolio manager, you are responsible for maintaining liquidity in your portfolio, especially during times of market stress. Liquidity management involves ensuring that you have sufficient cash or liquid securities to meet potential cash outflows while maximizing returns. Your portfolio consists primarily of government bonds, corporate bonds, and cash equivalents.

Which of the following strategies is most effective for enhancing the liquidity of your fixed income portfolio?

Investing in long-term corporate bonds that offer higher yields.

Including highly rated government bonds and cash equivalents.

Focusing solely on municipal bonds with longer maturities.

Hint

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