Reinvestment Risk and Yield Curves

RESEARCH CONTENT An analysis of the current inverted spot and forward yield curves in light of expectations that the market is expecting that Central banks will remain on hold for some time into next year.

The research highlights past experience of low returns for bond holders in low investment environments, and how this reinvestment risk might dominate the long end of curves, negating the usual steepening trends if and when Central Banks eventually start cutting rates.

Correlations show that the duration extension required from QT is working well, which should have important implication on long bond valuations.