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Do Long-Term Bonds Offer a Higher Return than Short-TermBonds?
Long-term bonds have on average yielded a higher return than short-term bondssince 1975 so that it has paid off to assume interest-rate risk. However, the excessreturn has varied widely over time. It is not certain that long-term bonds willalways yield a higher return than short-term bonds. This article describes therelation between the current yield curve and the expected excess return, andexplains why the excess return has varied over time.