The vanishing yield cushion

The collapse in global bond yields has delivered large windfall capital gains however it has come at the cost of a vanishing yield cushion.

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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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