Fixed income analysis is the process of determining the value of a debt security based on an assessment of its risk profile, which can include interest rate risk, risk of the issuer failing to repay the debt, market supply and demand for the security, call provisions and macroeconomic considerations affecting its value in the future.
Based on such an analysis, a fixed income analyst tries to reach a conclusion as to whether to buy, sell, hold, hedge or avoid the particular security.
Fixed income products are generally bonds: debt instruments requiring the issuer (i.e. the debtor or borrower) to repay the lender the amount borrowed (principal) plus interest over a specified period of time (coupon payments) until maturity.
To determine the value of a fixed income security, the analyst must estimate the expected cash flows from the investment and the appropriate required yield.
The required yield is applied to the expected cash flows to estimate their present value, which equals the security's value.