- The price of long-duration credit doesn’t necessarily decline substantially following a rise in short-term rates.
- When weighing the merits of delaying liability-driven investing (LDI) implementation, use forward curves to compare the return potential of different bond portfolios in light of expected changes in interest rates.
- Widespread acceptance of LDI and increased longevity suggests that — in the near future — supply may not fully meet growing demand for long-duration bonds.
- Issuance of corporate bonds with longer maturities could diminish as rates rise — resulting in reduced supply at a time of increased demand. Arguably, LDI implementation may become more challenging in the not-too-distant future.