ML-Implode News - Death By Duration: Austria 70-Year Bond Creams Investors In First Week

Austria's 70-year bond is providing traders with a perfect illustration of the perils of high duration. The nation sold 2 billion euros ($2.2 billion) of the bunds this week, taking advantage of historically low borrowing costs. While that looked like a boon for the government, it left investors subject to extraordinary price swings. A buyer of 10 million euros of the securities saw a paper loss of more than 500,000 euros by the end of Thursday, according to data compiled by Bloomberg.
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Investors have accepted higher duration as they pay unprecedented prices for longer debt, spurred on by accommodative policies from central banks that crushed yields on shorter-dated securities.
That's troubling because the higher the duration gauge goes, the steeper the losses will be when yields rise. The duration on Bank of America's Global Government Bond Index climbed to an all-time high of about 8.5 in July, from about 5 when the benchmark began in 1997.

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Death By Duration: Austria 70-Year Bond Creams Investors In First Week