What is the primary goal of active interest rate management decisions?

The primary goal of active interest rate management decisions is to identify mis-priced bonds. Active interest rate management involves assessing the current interest rate environment and determining the fair value of bonds in relation to their market prices. By identifying discrepancies between the market price and the intrinsic value of bonds, investors can make informed decisions to either buy undervalued securities or sell overvalued ones. This strategic approach aims to enhance returns on a bond portfolio by capitalizing on these mis-pricings.

In active interest rate management, other factors like maximizing shareholder value, reducing overall portfolio volatility, or enhancing market liquidity can be secondary considerations; however, they do not encapsulate the primary objective. The focus is geared towards understanding market inefficiencies and making tactical adjustments based on interest rate forecasts and economic indicators, which leads to identifying opportunities for profit in bond investments.