Explain the Strategy of Riding the Yield Curve

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The Answer is The strategy of riding the yield curve is one in which a bond trader attempts to generate atotal return over a given investment horizon that exceeds the return to bond with maturity matched to the horizon. The strategy involves buying a bond with maturity more distant than the investment horizon. Assuming an upward sloping yield curve, if the yield curve does not change level or shape, as the bond approaches maturity (or rolls down the yield curve) it will be priced at successively lower yields. So as long as the bond is held for a period less than maturity, it should generate higher returns because of price gains.

Explain the Strategy of Riding the Yield Curve

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Explain the Strategy of Riding the Yield Curve

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