If a long term bond in AFS portfolio is making a loss and that security can be shifted to HTM portfolio because any marking to market gains/losses on securities classified under AFS will effect Capital levels.Under IFRS-7 marking to market loss has to be amortized as premium when shifting to HTM.
If suppose a security's yield under AFS is 5% and after adjusting losses and transferred to HTM new yield is 7%. My question is, to calculate Reinvestment risk on this security, what rate to consider as future coupons reinvestment rate? I think it should be 7%. Am I right? and can anyone further explain this. If the reinvestment rate is 7% then there will be sudden rise in minimum reinvestment rate of the portfolio.
If suppose a security's yield under AFS is 5% and after adjusting losses and transferred to HTM new yield is 7%. My question is, to calculate Reinvestment risk on this security, what rate to consider as future coupons reinvestment rate? I think it should be 7%. Am I right? and can anyone further explain this. If the reinvestment rate is 7% then there will be sudden rise in minimum reinvestment rate of the portfolio.
