Re: moore on term structure (Henwood's post)

[Doug Henwood <dhenwood@xxxxxxxxx>]

Christopher Niggle wrote:

>Doug:  Even if bonds are churned, anyone holding one will experience a
>larger capital loss if rates rise during that thirty days and they have to
>sell (a larger loss than if they were holding short securities - look at a
>bond table).  The greater risk demands a higher expected return.

Sure, I'm not disputing the fact that longer-term instruments normally
carry higher returns for this reason. I'm saying, though, that in modern
markets those rates are most proximately set by short-term holders.

Doug