fixed income question
page 339 volume 3 of CFAI text:
“In general, for an upward-sloping yield curve, the immunization target rate of return will be less than the YTM because of the lower reinvestment return.”
Why is this the case? For an upward-sloping yield curve, the future interest rate is going up causing the bond price to go down and therefore the YTM to go up. When the interest rate goes up the reinvestment return should go up, not down as stated in the book.
Anyone got any ideas/comments on this?
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