Fixed income as an asset class casts a wide global net.
Fixed income includes government bonds, such as U.S. Treasury issues, U.S. agency issues, and municipal bonds, as well as the sovereign debt of countries worldwide. Fixed income also encompasses corporate bonds, including money markets, high-yield corporate bonds, leveraged loans, credit default swaps, convertibles, preferred stock, and sukuk, which are Shariah-compliant debt instruments.
Types of Fixed Income Instruments:
Indices tracking the prices and yields of fixed income securities may have less visibility than equity indices, but collectively, they track a significantly larger universe of securities than equity indices, both in the number of issues in the marketplace and their total market value in the U.S. and around the world.
For example, the S&P Municipal Bond Index tracks the vast U.S. municipal securities market, where investors hold debt valued at more than USD 3.9 trillion (Source: MSRB, 2019 data). The size and complexity of the market supports a range of more narrowly focused indices whose investment universes are defined by maturity, rating, duration, specific use, and state of origin, among other factors.
Like equity indices, fixed income indices may serve as market barometers and as benchmarks for active managers. They may also be the basis of investable products—for example, ETFs, mutual funds and derivatives, including structured products—for the investing public.