Performance of maturity transformation strategies

This paper analyses the performance of maturity transformation strategies during a period of high and low interest rates. Based on German government bond yields from September 1972 to May 2019, we construct a rolling window of bond ladders where long-term assets are financed by short-term liabilities. Risk and return increase significantly with maturity gaps for both sample periods. During the period of low interest rates, dominant strategies can be observed for short-term and medium-term gaps. With respect to different financial reporting standards, we address maturity transformation results from an earnings-based perspective as well as from a market value-based perspective.