This paper explores both theoretically and enirically the role of nominalbonds of various maturities in investor portfolios in the U.S. One of its principal goals is to determine whether an investor who is constrained to limithis investment in bonds to a single portfolio of money-fixed debt...

This paper explores both theoretically and enirically the role of nominalbonds of various maturities in investor portfolios in the U.S. One of its principal goals is to determine whether an investor who is constrained to limithis investment in bonds to a single portfolio of money-fixed debt...

We highlight how the bond "Greeks" drive the relevant factor loadings for the pricing ofTreasury securities. We show that only two factors--the exposures to which are durationand convexity--explain 99.5% of the variation in maturity-scaled yield changes, and bothfactors earn significant risk...