duration: vanguard intermediate bond vs NY long term

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Topic Author
bb
Posts: 325
Joined: Wed Apr 25, 2007 10:04 pm

duration: vanguard intermediate bond vs NY long term

Post by bb »

The vanguard intermediate bond has a duration and average maturity
close to each other (6.5,7.2) while the new york state long term fund
show (17.4,6.6).

So I am confused why one fund is considered intermediate and the other
fund is considered long term. For investing purposes would you put the
intermediate and new york long term in the same category in relation
to sensitivity to interest rates since they have similar durations?
Last edited by bb on Mon Feb 06, 2017 11:48 am, edited 1 time in total.
Topic Author
bb
Posts: 325
Joined: Wed Apr 25, 2007 10:04 pm

Re: duration: vanguard intermdiate bond vs NY long term

Post by bb »

Anybody?
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grabiner
Advisory Board
Posts: 29161
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: duration: vanguard intermediate bond vs NY long term

Post by grabiner »

What is going on is that most municipal bonds are callable. A bond maturing in 2042 which is callable in 2022 will behave like a 5-year bond if it is certain to get called, and a 25-year bond if it is certain not to get called. The maturity will be 25 years either way, but the duration depends on the difference between current bond yields and the yield to call. If the bond reports a duration of 8 years, this is based on the probability of a call; rising rates will make a call less likely.

Treasury bonds are not callable, and many corporate bonds are also not callable, so taxable bond funds don't have the same gap between duration and maturity.
Wiki David Grabiner
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