Skip to main content

Main menu

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

User menu

  • Sample our Content
  • Request a Demo
  • Log in

Search

  • ADVANCED SEARCH: Discover more content by journal, author or time frame
The Journal of Portfolio Management
  • IPR Logo
  • About Us
  • Journals
  • Publish
  • Advertise
  • Videos
  • Webinars
  • More
    • Awards
    • Article Licensing
    • Academic Use
  • Sample our Content
  • Request a Demo
  • Log in
The Journal of Portfolio Management

The Journal of Portfolio Management

ADVANCED SEARCH: Discover more content by journal, author or time frame

  • Home
  • Current Issue
  • Past Issues
  • Videos
  • Submit an article
  • More
    • About JPM
    • Awards
    • Editorial Board
    • Published Ahead of Print (PAP)
  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

Are Long-Duration Treasuries the Best Hedge for Equities?

Sunder Ramkumar and Andrew Bates
The Journal of Portfolio Management November 2020, jpm.2020.1.182; DOI: https://doi.org/10.3905/jpm.2020.1.182
Sunder Ramkumar
is a senior vice president at Capital Research and Management Company, a part of Capital Group, in New York, NY
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
Andrew Bates
is a senior client analytics specialist at American Funds Distributors, Inc., a part of Capital Group, in Los Angeles, CA
  • Find this author on Google Scholar
  • Find this author on PubMed
  • Search for this author on this site
  • Article
  • Supplemental
  • Info & Metrics
  • PDF (Subscribers Only)
Loading

Click to login and read the full article.

Don’t have access? Click here to request a demo 
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
EMEA: +44 0207 139 1600

Abstract

The authors study the link between bond maturity and equity diversification in developed economies across the last six decades. Although correlations between equities and interest rates have been largely similar for different bond maturities, yield-curve dynamics have varied considerably across episodes of stock-market stress. All interest rates tend to fall during sharp market crashes, but US, German, and UK yield curves steepened over prolonged downturns, and the Japanese yield curve flattened. As a result, 20-year bonds had estimated returns similar to 10-year bonds during equity downturns in the United States and Germany, were 26% lower in the United Kingdom, and outperformed only in Japan. The diversification gains of maturity extension are linked to macroeconomic factors, including monetary policy, expected inflation, and the shape of the yield curve. Yield curves tend to decline most during conventional easing but steepen considerably, whereas quantitative easing can instead flatten yields. These findings suggest that duration management may be best as an active investment discipline.

TOPICS: Developed markets, financial crises and financial market history

Key Findings

  • • Yield-curve dynamics can vary considerably across episodes of stock-market stress. Although all interest rates tend to fall during sharp market crashes, US, German, and UK yield curves steepened considerably over prolonged downturns, and the Japanese yield curve flattened.

  • • Long-maturity bonds have offered mixed incremental diversification benefits. Twenty-year bonds had estimated returns similar to 10-year bonds during equity downturns in the United States and Germany, were 26% lower in the United Kingdom, and outperformed only in Japan.

  • • Diversification gains of maturity extension are linked to monetary policy. Yield curves tend to decline most during conventional easing but steepen considerably, whereas quantitative easing can instead flatten yields. This suggests that duration management should be an active investment discipline.

  • © 2020 Pageant Media Ltd
View Full Text

Don’t have access? Click here to request a demo

Alternatively, Call a member of the team to discuss membership options

US and Overseas: +1 646-931-9045

UK: 0207 139 1600

Log in using your username and password

Forgot your user name or password?
Next
Back to top

Explore our content to discover more relevant research

  • By topic
  • Across journals
  • From the experts
  • Monthly highlights
  • Special collections

In this issue

The Journal of Portfolio Management: 47 (5)
The Journal of Portfolio Management
Vol. 47, Issue 5
Investment Models 2021
  • Table of Contents
  • Index by author
  • Complete Issue (PDF)
Print
Download PDF
Article Alerts
Sign In to Email Alerts with your Email Address
Email Article

Thank you for your interest in spreading the word on The Journal of Portfolio Management.

NOTE: We only request your email address so that the person you are recommending the page to knows that you wanted them to see it, and that it is not junk mail. We do not capture any email address.

Enter multiple addresses on separate lines or separate them with commas.
Are Long-Duration Treasuries the Best Hedge for Equities?
(Your Name) has sent you a message from The Journal of Portfolio Management
(Your Name) thought you would like to see the The Journal of Portfolio Management web site.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
Citation Tools
Are Long-Duration Treasuries the Best Hedge for Equities?
Sunder Ramkumar, Andrew Bates
The Journal of Portfolio Management Sep 2020, jpm.2020.1.182; DOI: 10.3905/jpm.2020.1.182

Citation Manager Formats

  • BibTeX
  • Bookends
  • EasyBib
  • EndNote (tagged)
  • EndNote 8 (xml)
  • Medlars
  • Mendeley
  • Papers
  • RefWorks Tagged
  • Ref Manager
  • RIS
  • Zotero
Save To My Folders
Share
Are Long-Duration Treasuries the Best Hedge for Equities?
Sunder Ramkumar, Andrew Bates
The Journal of Portfolio Management Sep 2020, jpm.2020.1.182; DOI: 10.3905/jpm.2020.1.182
del.icio.us logo Digg logo Reddit logo Twitter logo CiteULike logo Facebook logo Google logo LinkedIn logo Mendeley logo
Tweet Widget Facebook Like LinkedIn logo

Jump to section

  • Article
    • Abstract
    • DIVERSIFICATION PROFILE OF CONSTANT MATURITY US TREASURIES
    • STOCK–BOND DIVERSIFICATION IN GERMANY, THE UNITED KINGDOM, AND JAPAN
    • IMPACT OF MONETARY POLICY
    • IMPLICATIONS FOR INVESTORS
    • CONCLUSIONS
    • ACKNOWLEDGMENTS
    • ADDITIONAL READING
    • ENDNOTES
    • REFERENCES
  • Supplemental
  • Info & Metrics
  • PDF (Subscribers Only)
  • PDF (Subscribers Only)

Similar Articles

Cited By...

  • No citing articles found.
  • Google Scholar
LONDON
One London Wall, London, EC2Y 5EA
United Kingdom
+44 207 139 1600
 
NEW YORK
41 Madison Avenue, New York, NY 10010
USA
+1 646 931 9045
pm-research@pageantmedia.com
 

Stay Connected

  • Follow IIJ on LinkedIn
  • Follow IIJ on Twitter

MORE FROM PMR

  • News
  • Awards
  • Investment Guides
  • Videos
  • About PMR

INFORMATION FOR

  • Academics
  • Agents
  • Authors
  • Content Usage Terms

GET INVOLVED

  • Advertise
  • Publish
  • Article Licensing
  • Contact Us
  • Subscribe Now
  • Sign In
  • Update your profile
  • Give us your feedback

© 2021 Pageant Media Ltd | All Rights Reserved | ISSN: 0095-4918 | E-ISSN: 2168-8656

  • Site Map
  • Terms & Conditions
  • Privacy Policy
  • Cookies