Reinvestment risk

Reinvestment risk — the danger that money coming due (a maturing bond, a coupon, an MP2 payout) must be reinvested at worse rates than it was earning — the mirror image of price risk, and the one that bites when rates fall. A ladder neutralizes it structurally: with one rung maturing each year, only a fraction of the layer ever reprices at any single moment — never all-in at a rate top, never all-out at a bottom. DCA for fixed income.

First used in: 2.3 · Bonds and the peso ladder