The retail crowd often think that it is a good idea to buy long term bonds and hold until maturity to "lock-in" the current higher yields. I think that they are exposing themself to inflation and paying the opportunity cost as well. Unless they have fixed and matching liability, they should stick to shorter term bonds?

I am not talking about earning duration premium by maintaining cost duration and periodic rebalancing

  • $\begingroup$ Isn't the fact that curves are usually upward sloping indicating a positiive risk premium for longer term securities, therefore offering compensation for this liquidity/risk? Ofcourse, the upward curve could also be indicating increases in future spot rates too. $\endgroup$
    – user68819
    Oct 29, 2023 at 10:20
  • $\begingroup$ It would seem very advantageous to "lock in" long term yields as soon as they have risen to or above an equilibrium level for this inflation cycle. However even professionals do not know what that level is, and there is a risk that yields may rise higher, perhaps considerably, after you purchase LT bonds. So it is a fortiori not recommended for amateurs. $\endgroup$
    – nbbo2
    Oct 29, 2023 at 20:03


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