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Currently the yields to maturity on 10 year bonds are as follows: Bond Type Yield to Maturity Treasury 6.00% AAA Corporates 6.50% BBB Corporates 7.50%

Currently the yields to maturity on 10 year bonds are as follows: Bond Type Yield to Maturity Treasury 6.00% AAA Corporates 6.50% BBB Corporates 7.50% You are a bond manger and currently have 30% of you portfolio in Treasuries 40% in AAA Corporates and 30% in BBB Corporates. Your analysis of normal yield spreads suggest that AAA bonds should offer about 25 basis points above Treasuries and BBB bonds should offer about 250 basis points over Treasuries How will you adjust your portfolio and what does this involve you in doing?

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