Breakeven Spread Analysis

One question - appreciate if anyone can help: What is the rationale of using the higher duration? Thanks in advance.

I assume you are talking about comparing the relative value of two bonds. You want to use the higer duration because that can expose the senentative of the price change more quickly. Movement in price can cancel out the yield advantage of the higher-yield bond given the movement in interest rate.

ws Wrote: ------------------------------------------------------- > I assume you are talking about comparing the > relative value of two bonds. You want to use the > higer duration because that can expose the > senentative of the price change more quickly. > Movement in price can cancel out the yield > advantage of the higher-yield bond given the > movement in interest rate. Ok got it! Thanks again.

If you expect interest rates to go down, you can lengthen your duration. When rates go down, your portfolio will increase ‘more’