Barbell portfolios

CFA Level III Fixed Income
#1

Why would a barbell portfolio outperform a benchmark (on the run US Treasuries) in :

  1. increased curvature where the short and long term rates rise? (I read it for “more curvature” and considering a scenario of curvature on the downside of the curve by myself) )

  2. for parallel changes, shouldn’t the difference in upward and lower changes be almost the same? (6 bp difference in extreme barbell vs less extreme)

  3. Why would a barbell outperform a bullet portfolio in a parallel upward shift?

#2

Outperform what, exactly?

#3

.

#4

updated the post

#5

increased curvature = short and long end rates decrease, mid-rate increases.

Barbell with its greater convexity benefits from it vs bullet.

#6

Increased curvature leads to decrease in short and long rates, so investing in short term security and long term security will outperform a bullet security invested in the middle (with high rates)