Portfolios with higher convexity typically have:

Choosing higher convexity can affect the yield on a portfolio due to the desirability of such characteristics among investors. Convexity refers to the curvature in the relationship between bond prices and yields; portfolios with higher convexity tend to show less sensitivity to interest rate changes. This makes bonds with greater convexity more attractive to investors, particularly in uncertain or volatile interest rate environments.

When there is high demand for convexity, investors may be willing to accept lower yields in exchange for the stability and predictability that comes with it. Essentially, the market rewards bonds that offer this desirable feature, resulting in lower yields for portfolios with higher convexity. This relationship underscores the concept that when an attribute, like convexity, is valued in the market, it can drive the associated yields downward.

This understanding helps investors make decisions regarding the trade-offs between yield and risk profiles in their fixed income investments. In contrast, portfolios that lack this convexity might need to offer higher yields to attract investors who are taking on greater risk.