Just confused with the concept “riding the yield curve” and “forward price evolution”.
For riding the yield curve, if the yield curve is upward sloping, investors can buy bonds maturity longer than his investment horizon since as the bond approaches the investment horizon, it is valued using successively lower yields and therefore at successively higher price (i.e. after 1 year, you can have a capital gain). It seems that this method can earn higher return than the maturity matching strategy.
However, according to forward price evolution section, it says that if the spot rates evolve as predicted by today’s forward curve, the return on a bond over a one-year horizon is always same ie the return is the same even you purchase a bond with maturity longer than your investment horizon (e.g. 1 year) and sell it after 1 year. Does it mean that even the yield curve is rising, as long as the future spot rates evolve as predicted by today’s forward curve, the return on the bond is same no matter you purchase a bond that matches your investment horizon or not. This seems to contradict riding the curve strategy.
Anyone can point out the trick?