Barbell strategy with bond portfolios: theory review and empirical study with government bond portfolios of Vietnam Prosperity Joint Stock Commercial Bank in 2018
Barbell strategy with bond portfolios: theory review and empirical study with government bond portfolios of Vietnam Prosperity Joint Stock Commercial Bank in 2018

Summary/Abstract: The Barbell strategy is founded on the methodology initiated by the economic professor Harry Markowitz in a «portfolio theory» [2]. This strategy is mostly conducted by big scale institutions to cope with volatilities of market interest rates, diversify portfolios and increase the probability of higher return. The Barbell strategy is one of the fixed income securities investment strategies, focusing on short-term and long-term bonds and ignoring medium-term bonds, with the aim of balancing between liquidity and profit. In the context of a stable economy, the Barbell strategy is considered an advisable tool for big investors such as commercial banks, which helps them to construct their bond portfolios in not only preserving liquidity but also in ensuring sustainable profit. Besides reviewing the contents of the Barbell strategy and the forecasted yield curve of Vietnamese government bonds in 2018, the authors also test this strategy with Vietnam Prosperity Joint Stock Commercial Bank’s Portfolio in Vietnam Government Bonds in 2018. The suggested portfolio is classified into four types of bonds: one-year bonds (EUR 269.117 million); three-year bonds (EUR 459.082 million); ten-year bonds (EUR 708.412 million); and fifteen-year bonds (EUR 19.789 million). This application demonstrates the feasibility and reliability of the Barbell strategy.

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