So we want Immunization Yield available in the market > Minimum Acceptable Return in order to create cushion spread. However if yields go up, we lose value in terms of the bond, so immunization is kicked in. Maybe I am confusing myself, and I’ve lost site of two different issues that I am combining as one, but do you want the yield to increase or decrease relative to the minimum acceptable rate? On the one hand it seems like increase leads to cushion spread, on the other it seems like it decreases asset values and kicks in full immunization.
I’m not sure if I understand your question. Here is my understanding. The Minimum Acceptable Return(MAR) may increase also if the yields go up. If the future liability is a fixed value. When the rates go up, 1) the present values of assets & liabilitiues go down; and 2) the immunization rate and the minimum acceptable returns go up.