A barbell strategy avoids intermediate-term bonds and equally invests in very short term and very long term durations.
The barbell strategy divides a sum, for instance $10,000, equally among bonds with short durations and bonds with long durations. If the interest rates will go up sharply, the proceeds from your short-duration bonds will be reinvested into new bonds with much higher coupons.
If the interest rates drop sharply, the proceeds from the bonds with shorter durations will be reinvested at a much lower coupon, but on the other hand, your long-duration bonds will rise sharply in price.
Can You Pay More Than Nominal Value for a Bond?
How Do I Structure My Bond Portfolio?
What is the Ladder Strategy for Structuring My Bond Portfolio?
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