Which description fits the term "bullet strategy" in bond management?

The bullet strategy in bond management is characterized by a concentration on bonds that have similar maturities. This approach is designed to create a portfolio where the principal repayments occur at the same point in time—specifically, at the maturity of the bonds selected. By aligning the maturity dates, investors can manage interest rate risk effectively, as they know when cash flow will occur and can strategically look to reinvest accordingly.

Investors often prefer this strategy during periods of uncertainty about interest rates, as the concentration in similar durations allows for predictability and alignment with investment goals, such as funding a specific obligation or taking advantage of expected shifts in interest rates.

While other strategies, such as those focusing on short-term or long-term bonds, do exist, they do not encapsulate the essential focus on maturity alignment that defines the bullet strategy. Diversifying across multiple sectors relates to risk management but does not directly correspond to the specific maturity profile that the bullet strategy emphasizes.