Quote:
Originally Posted by Slava
Like in January 2022 where bond index funds had durations of 10 heading into the rate hikes. Almost everyone was predicting rate hikes at that point, albeit maybe not as many hikes as we saw. So, when you have the duration that high and are almost positive that rate hikes are on their way, it's exactly what you don't want as an investor.
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This is a good point. The way I'd look at is that corporations can largely decide which length of debt is the most attractive to them at any given time. When rates were super low after covid CFOs everywhere were locking in low rates for a decade or three, because long term money was really cheap and rates were likely to go up. So in many ways that's analogous to the index holding lots of companies that have too much debt, it'll also hold more of the debt that companies think it's to their advantage to issue.
Now, the obvious solution to that is pick a duration/maturity specific index, but it's a reasonable objection nonetheless.