Sch book 3, LOS 21 e, pg 59
Dear all,
Under barbell structures it says:
‘As opposed to using short -term treasuries, corporate seurities are used at the front end of the yield curve with long-term treasuries at the long end of the yield curve’
Can anyone please explain the logic/benefit behind allocating int he way explanined above.
Thank you
bump
bump
Short-term corporates will have a higher yield than short-term Treasuries. Some investors don’t mind taking on the credit risk.
Barbell strategy is one where you want to immunize your liabilities which are focused on short end and long end of the yield curve. The credit risk is low at the short-end vs long-end all else equal. So you might want to pickup some yield however do not want exposure to high credit risk corp bonds offer at long end.