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I am struggling to comprehend the difference in impact between spread duration & IR for a fixed rate bond when yields move.

I know that both measures would be the same for a fixed rate bond but how exactly do they differ when yields fall? So for example, if the bond had a spread & IR duration of 2 years, then if yields fell by 1% then my bond price would increase by 2%? If so, does that mean if I am concerned about falling yields I could put on a future position to protect against yields falling, but would that also protect my credit duration exposure?

Thanks

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  • $\begingroup$ The futures position would only protect you against movements in the non-spread part of the bond yield. It won't protect you against spread movements. $\endgroup$ – ilovevolatility Sep 17 at 7:28

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