What does it mean to be long duration in bonds?

The Impact of Duration on Bond Funds Typically, fund managers will say their portfolio is “overweight” or “long” duration, meaning that their duration is higher than that of the fund’s benchmark. Alternatively, the portfolio could be “underweight” or “short” duration.

What does long and short duration mean?

Generally, bonds with long maturities and low coupons have the longest durations. These bonds are more sensitive to a change in market interest rates and thus are more volatile in a changing rate environment. Conversely, bonds with shorter maturity dates or higher coupons will have shorter durations.

What is the long duration trade?

The U.S. Long Duration Strategy is a value-oriented strategy that seeks attractive total returns from income and capital appreciation by investing in U.S. Government and investment-grade corporate debt securities with at least ten years to maturity.

What are long duration assets?

Long-term assets (also called fixed or capital assets) are those a business can expect to use, replace and/or convert to cash beyond the normal operating cycle of at least 12 months. Often they are used for years.

What does going long duration mean?

Duration can also measure the sensitivity of a bond’s or fixed income portfolio’s price to changes in interest rates. In general, the higher the duration, the more a bond’s price will drop as interest rates rise (and the greater the interest rate risk).

What does it mean to long duration?

adjective. 1That lasts for or involves a relatively long period of time. 2Finance. Maturing or becoming effective only after a relatively long period of time.

How do you interpret duration?

In general, the higher the duration, the more a bond’s price will drop as interest rates rise (and the greater the interest rate risk). For example, if rates were to rise 1\%, a bond or bond fund with a five-year average duration would likely lose approximately 5\% of its value.

How long is a duration?

duration Add to list Share. Duration is how long something lasts, from beginning to end. A duration might be long, such as the duration of a lecture series, or short, as the duration of a party. The noun duration has come to mean the length of time one thing takes to be completed.

What is an example of duration?

Duration is defined as the length of time that something lasts. When a film lasts for two hours, this is an example of a time when the film has a two hour duration. A measurement of a bond’s price sensitivity to changes in interest rates.