Re: T-bond holding period

[wfhummel@xxxxxxxxxxxxxx (William F. Hummel)]

>>William F. Hummel wrote:
>>The point I am suggesting is that the average may not be a good
>>reflection of what is going on.  Some institutions like insurance
>>companies, foundations, endowments, foreign central banks, etc.
>>are long term holders of bonds, not traders.  The traders may be
>>rapidly turning over a small fraction of any particular issue
>>giving the appearance of a short holding period on average.  I
>>think one has to look behind the figure quoted by the Benzie in
>>the BIS before deciding what it really means.

>Henwood wrote:
>But the ones who trade actively have a disproportionate influence in
>setting the price, no?
-------------
No.  It is the long term investors who determine the long term
premium, about which the price will fluctuate in the short run
due to the activity of the traders.  Otherwise there would be no
basis for the term structure.

Recall the original point of the discussion:

>Niggle wrote:
>Perhaps I'm missing something but the straighforward answer for the long
>maturity premium is that long bonds have greater interest rate risk, and
>most bond investors are risk averse....right?

>Henwood wrote:
>Except that the average holding period for a US Treasury long bond is
>about 30 days.

William F. Hummel