At the page 161 of Volume 4 the manager is long the 2 Year bond and short the 5 Year bond for the first leg and he is short the 10 year bond and long the 30 year bond for the second leg. Both legs are duration neutral.
They say that each pair will produce profits if the yield curve adds curvature.
Anyone can explain how is that possible ?
My thoughts, for the first leg, are that if he’s short the 5 year it should lose money (more) than the money he makes on the long 2 year if the yield curve adds curvature.
Thank you !