Bullet vs Barbell
Two contrasting bond-portfolio structures with the same effective duration but different curve-shape sensitivities. A BULLET concentrates exposure near a single maturity (e.g., 80% at 5-year notes). A BARBELL splits exposure between short and long maturities (e.g., 50% at 2-year + 50% at 30-year). At matched duration the barbell carries the higher convexity, so it outperforms under parallel shifts of either sign; what the bullet gets in exchange is yield -- on an upward-sloping curve the single mid-curve maturity out-carries the mix, and that carry is what the barbell gives up to hold the convexity. Under non-parallel shifts the barbell outperforms on a flattening and underperforms on a steepening. The active-management trade-off is whether the expected move is parallel or shape-changing.
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Related terms
10Y Treasury · Altman Z-Score · Asset Sensitivity · Basel III · Bond ETF · Bretton Woods
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