“The portfolio manager may position their bond portfolio to reflect their outlook on the future level of interest rates. This involves lengthening the portfolio’s duration if interest rates are set to fall and shortening the duration if interest rates look set to rise.” i dont get this. i thought it was the opposite, that if interest rates are going to fall and if they lengthen the duration, that means they will get less interest on the bonds that they hold. can someone plz explain? thx.
When interest rates fall, prices of bonds rise. So if you have a portfolio that has a long duration, the value of the portfolio will increase more than a short duration portfolio.