Since government bonds can vary in maturity from one to 30 years, the ratio of fixed-rate debt to total debt tells us very little about the maturity profile of the debt or the risks associated with it. Consequently, the average term to maturity of the portfolio also must be considered. The average life span of the debt instruments a portfolio comprises. The government reports its performance on ATM at around 6 years for 1998-99, up from 4 years in 1990. However it does not compare its ATM target with those of other countries.
Duration is a measure of the interest sensitivity of the portfolio.
It is the weighted average term to maturity of a bond's cash flows, where the weights are the present value of each cash flow as a percentage of the bond's prices. It takes into account the current market value of future cash flows. Hence, the issuance of debt instruments at lower interest rates will translate into a longer duration. A portfolio with a longer duration is more sensitive to changes in interest rates. Two portfolios with identical maturities but different coupon payments will provide different cash flows and different sensitivities to interest rate changes.