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Bond Investing Master Class - How to Invest in Fixed Income

Money For the Rest of Us

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What Is the Convexity of a Bond?

As interest rates go up for traditional bonds the duration shortens. Now that's known as positive convexity we can also have a negative convexity where durations get shorter as interest rates fall. An example of this type of convexity is a mortgage backed security. Three or four years ago it would have had a duration perhaps over 20 years because interest rates were lower.

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