Set out the methods for estimating expected returns on fixed income

Three methods apply. The discounted cash flow approach uses today's yield to maturity; for a horizon equal to Macaulay duration, yield changes roughly offset between price and reinvestment, so yield is a fair estimate, adjusted for expected rolldown and any expected yield change. The building block approach sums a short-term default-free rate, a term premium, a credit premium and a liquidity premium, each estimated with reference to the cycle and current spreads. Equilibrium models such as Singer–Terhaar derive premiums from risk and the global market price of risk. Note that yield is a poor guide when the horizon differs greatly from duration, and that term and credit premiums vary with the cycle rather than being constants.