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Duration Shortening Swap


A bond swap that involves swapping a long maturity bond with a shorter maturity bond. This swap helps investors to move out on the yield curve towards shorter maturities seeking higher yields, on inverted yield curves, or to position bond portfolios to withstand rate increases/ hikes. In cases where the yield curve is normal (normal yield curve), this swap is used to reduce duration in order to take advantage of any expected drops in bond prices.



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