Sensitivity to interest rates and probability of default are the dominant risk factors for bonds. Portfolio Lab quantifies these risks at the portfolio level and position level.

To display the analysis, select Allocation -> Bond Style

allocbondstyle

Duration is a measure of sensitivity to interest rates. It estimates the price gain or loss that would result from a 1% change in interest rates. For example, a bond with a duration of 5 will approximately loose 5% in value if interest rates rise 1%, and gain 5% in value if interest rates decrease by 1%.

The portfolio duration is a weighted sum of the positions durations. You may drill down to each position duration (for funds, the average duration of holdings is shown):

Duration by position

Credit quality indicates the probability of default. It ranges from AAA (high quality) to B (low quality). The portfolio credit quality is a weighted combination of the positions credit qualities. You may drill down to each position credit quality:

Bond credit quality

For more information on this analysis, please refer to Portfolio Lab’s user manual.