What CFA Level 1 Fixed Income actually tests
Fixed Income is 11-14% of the Level 1 exam:
| Area | What it covers |
|---|---|
| Bond Features | Indenture, covenants, embedded options, seniority, securitisation |
| Bond Markets | Primary/secondary markets, OTC vs. exchange, repo market |
| Bond Valuation | Full/flat price, accrued interest, YTM, spot rates, forward rates |
| Yield Measures | Current yield, YTM, YTC, YTP, bond-equivalent yield, effective annual yield |
| Term Structure | Expectations, liquidity preference, market segmentation theories |
| Duration | Macaulay, modified, effective, dollar duration, convexity |
| Credit Risk | Default probability, loss severity, credit ratings, high-yield vs. investment-grade |
| Structured Products | MBS, ABS, CDO, CMO, prepayment risk |
Duration vs. modified duration — the distinction that costs marks
Macaulay duration is a time measure (a weighted-average number of years). Modified duration is a price-sensitivity measure derived from it. Candidates who memorize the Macaulay formula but not the adjustment often answer a "how much will the price move" question with the wrong number — off by the (1 + yield) factor.
Sample question: Modified Duration
A bond has a Macaulay duration of 8.5 years and a yield to maturity of 6% (annual compounding). What is the bond's modified duration?
Modified Duration = Macaulay Duration / (1 + YTM) = 8.5 / 1.06 = 8.02 years. This means a 1% change in yield moves the bond's price by approximately 8.02% — always slightly lower than the Macaulay figure since it's discounted by one period of the yield.
The 2026 Fixed Income syllabus, module by module
Pinnacle runs on a syllabus graph — named modules with explicit prerequisites, each one mapped against CFA Institute's official 2026 Level I topic outline. It is the same map the free diagnostic reasons over, not a marketing summary of it. Fixed Income is the largest confirmed topic in the graph — eighteen module headings below, and what each one covers:
Bond Features & Cash Flows
What sits in the indenture: coupon structures, embedded options, and contingency provisions.
Fixed-Income Markets for Corporate Issuers
The short-term funding corporations actually use — commercial paper, repurchase agreements, bank funding — and the structure of corporate debt.
Fixed-Income Markets for Government Issuers
Sovereign and non-sovereign government debt: issuance mechanisms and the instruments used by national governments, agencies, supranationals and local authorities.
Fixed-Income Issuance and Trading
How bonds reach the market and change hands: underwritten and best-efforts offerings, auctions, private placements, and the structure of secondary trading.
Bond Pricing
Pricing a bond as the present value of its cash flows, the price-yield relationship, and full versus clean price.
Yield Measures
Yield to maturity, current yield, yield to call, bond-equivalent yield, and spread measures.
Yield Measures for Floating-Rate Instruments
The conventions that change for floaters and money market instruments: quoted margin, discount margin, and where these differ from fixed-rate measures.
Spot & Forward Rates
The spot curve, the forward curve, bootstrapping, and forward rate agreements.
Duration
Macaulay duration as a weighted-average time to a bond's cash flows.
Modified Duration
Macaulay duration scaled by yield — the first-order measure of price sensitivity.
Price Sensitivity & PVBP
Estimating the price change from a yield move using money duration and the price value of a basis point.
Convexity
The second-order correction to a duration estimate, including positive versus negative convexity.
Yield Curve Effects
Parallel and non-parallel shifts, key rate duration, and curve strategies.
Credit Risk & Analysis
Credit ratings, the four Cs, credit spreads, and expected loss.
Credit Analysis for Corporate Issuers
Assessing corporate credit quality: the components of credit analysis, the financial ratios used, seniority ranking and recovery, and the drivers of rating decisions.
Credit Analysis for Government Issuers
The qualitative and quantitative factors used to assess sovereign and non-sovereign government credit — and how they differ from corporate assessment.
Asset-Backed Securities
Securitisation end to end — the graph tracks this as two teaching units. One covers instrument and market features: the assets securitised, the structures used including credit tranching, and the risks that distinguish ABS from other fixed-income instruments. The other covers securitisation mechanics, MBS, prepayment risk, and tranching.
Mortgage-Backed Securities
Mortgage loan characteristics, pass-through securities, collateralised mortgage obligations, and prepayment risk.
Every practice question in the bank is tagged to one of these modules — which is how the diagnostic can name the specific concept underneath a wrong answer, not just the topic area it sat in.
Module names follow CFA Institute's published 2026 Level I topic outline, referenced for accuracy. Pinnacle is an independent adaptive learning platform. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute. Pinnacle is not affiliated with, endorsed by, or connected to that organisation.