If you expect rates to go up, buy st duration bonds and sell lt duration bonds if you expect rates to go down, buy lt duration bonds and sell st duration bonds. What if rates have just gone up or just gone down, what should relative value analysis tell us?
I don’t think it tells us anything other than whether our portfolio is now up or down. We would want to know what’s expected in the future to make decisions about relative value.
I see. thanks bhill