immunization target rate of return

just read this but don’t understand it, can anyone please explain… (vol 3, p339.) “In general, for an upward-sloping yield curve, the immunization target rate of return will be less than the yield to maturity because of the lower reinvestment return” i would have thought an upward sloping YC means coupons can be reinvested at yields higher than the current YTM, leading to a higher target rate of return, not lower. what am i not understanding here?

The coupons will be reinvested at the short term interest rate (as and when you receive them). The immunization target rate of return is a longer term rate based on the investment horizon of the portfolio. When the yield curve is upward sloping, the short term rates are less than the long term rates.

of course - thanks!

Do they tell us how to calculate the immunization target rate of return, or do they just give us this in the question. I’ve only seen the Stalla video on this so far but it didn’t seem to explain how the target rate of return for immunization is determined. Is it just the IRR computed for all the liabilities CFs?

If you were truly and perfectly immunized you would have no coupons to reinvest – they’d all be used to pay liabilities as they come due. Seems to me that the target rate of return is only ever different from the YTM if you have imperfect immunization. Am I missing something?