if the yield curve goes from flat to inverted, is a barbell strategy preferred? Reason: Higher reinvestment rates in short-run Price appreciation in long -run

that was the rationale on one of the Schweser tests…

but is it accurate? if you look at sample #1 from CFA, the question is reversed. A flat curve that becomes upward sloping favors bullet. Looking at their explanations, the reverse (downward sloping curve) favors barbell, no?

Can you tell me which Schweser test that was in? Thank you!

I believe it is… long end of the bond which has higher duration appreciates since LT rates fall. and reinvestments are made at short term… or at leat you can think it this wy

Was the Schweser saying Long DUR barbell or short DUR barbell?

depending on how the immunization problem is structured. (i.e. how an optimization problem is set) 1. minimize immu. risk (m^2) subject to matching effective duration. 2. maximize immu. return subject to matching effective duration. for the problem 1, barbell is always out b/c of larger m^2. while for the problem 2, barbell does have its place. FT, your analysis applies to problem 2. but, i have impression that, unless clearly specified, cfai’s focus is on the problem 1. so, even the curve inverts, the correct answer should still be a bullet (a long one). schweser talks about immu. without differentiating the two, therefore, is somewhat confusing. so, for this subject, use cfai.