The barbell strategy is a fixed income portfolio construction approach in which an investor concentrates bond holdings at two extremes of the maturity spectrum — typically short-duration and long-duration bonds — while avoiding intermediate maturities entirely. The short-duration portion provides liquidity and capital preservation, while the long-duration portion captures higher yields. The strategy is named after the shape of a barbell, with equal weight at both ends. A barbell portfolio is more sensitive to changes in the shape of the yield curve than a bullet portfolio of similar average duration — it outperforms when the yield curve flattens (short rates rise relative to long rates) and underperforms when the curve steepens. Indian debt fund managers use barbell strategies when they expect volatile or uncertain rate environments, balancing liquidity needs with yield maximisation.
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