Does Barebell portfolio outperform bmk if curvature decrease whether we have started with an inverted yield curve?

Hi, if we start with an inverted yield curve (with a curvature like a “U”) the Barebell strategy will outperform if the curvature is decreasing (e.g. the body-central part of the yiled curve goes up and the short positions will gain).

The text book is rather saying that less curvature will always have a negative impact to the barebell strategy.

Maybe I’m wrong in how I think curvature looks like…

That is an interesting thought.

In the inverted yield curve as you have mentioned, a barbell strategy might have little to do with how the middle yield change right? So it might actually be immune to the rising yield, and “outperform” relative to a bullet maybe.

In that case, it is less curve for sure.

Thank you biwa.

yes i was wrong saying the below:

because there are no positions. On what we are aligned is that barebell will outperform a bullet in the inverted scenario.

An example:

  • Bullet 5y
  • Barebell 1y, 10y

Base scenario:

Scenario 1:

In this case Bullet 5y will lose money, Barebell will mantain. Barebell better than Bullet

Scenario 2:

In this case Bullet 5y will lose money, Barebell will gain on the 10y. Barebell better than Bullet

Pls correct (anyone) if I’m wrong