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In recent months, some managers have shortened their funds' duration to reduce their interest rate sensitivity.
We also observe an increased interest rate sensitivity.
Typically, when I record my PV01 and I'll record some version, something like my PV01 in that vector, my interest rate sensitivity, I'm going to record it as a negative.
Interest rate sensitivity and modified duration.
Duration is a measure of interest rate sensitivity.
Duration is a concept that bond investors should become familiar with; in basic terms, duration measures the overall interest rate sensitivity of a bond or portfolio of bonds.
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Gordon Brown likes the idea of long-term fixes because they would reduce the interest-rate sensitivity of the British economy.
The fund's duration, a measure of interest-rate sensitivity, is 4.5 years, mirroring the Salomon Smith Barney High Yield Market index, he said, "so it has junk bonds' typical sensitivity to interest rates".
So, duration is the interest-rate sensitivity of the portfolio.
Theres more to interest-rate sensitivity in a muni portfolio than when your bonds mature.
The only thing is, you do have greater interest-rate sensitivity the higher you go in quality.
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