johntavv wrote:
IHateMyLIFO wrote:
jmaldonado is right. As the answer stated, it has nothing to do with convexity or duration, it’s basically just a trade to pick up more yield in an improving economy. If you have to make assumptioins for a question, then you’re probably going about it the wrong way.
I get that the improving economy means we can pick up yield since the BB+ that we bought will increase in value.
But question stated that there is also an upward shift in yield, so the BB+ that we bought will decrease in price more than the BBB- that was sold, hence overall negative effect.
Or is this question focussed only on the yield and not price?