The asymmetry of interest rate duration risk

A common way to think about bond yields is to view them as a cushion that protects bondholders from the potential negative effects of duration risk. As bond yields have now collapsed to very low levels, that protection from duration risk has vanished.

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Conventional fixed income is not doing its job

Conventional portfolio construction assumes that governments bonds will diversify equity risk. The theory is that when equities fall, bond yields decline, resulting in capital gains on bonds that help offset equity losses. The problem is that it’s not working that way in practice.

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