2/ It's often repeated that declining interest rates over the last 40 years created a bull market in bonds that is unlikely to ever be repeated again. I do not believe the facts actually support that narrative.
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Very interesting that the 30y have the highest *rolldown* returns of the bunch. I would have expected them to have the same or less, more than compensated of course by duration returns.
There are two components, the pure rolldown effect (which is small for 30s and sometimes even negative) and pure yield level which is captured by duration shortening, which is more significant (that’s my intuition, haven’t checked)
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I assumed that was where you were capturing carry. What is the periodicity of duration re-lengthening in that model?
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Quarterly. To be clear the “rolldown” term in the charts captures both carry (ie maturity shortens so you earn starting roughly yield x dt) and rolldown (ie predictable yield change as maturity shortens so you earn approx duration x dy)
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