It is natural to expect that traditional, i.e. nominal-rate, long-term bonds (with a distant maturity) of a state with a high financial solidity (for example, the United States or Germany) must offer a rate of return greater than shorter-term bonds.
The positive difference in yield between the two maturities is called maturity or term premium. This intuition also appears to be confirmed by the slope of the yield curve, which historically has, for the most part, been upward sloping (with the yields on longer bonds being higher than those on short-term bonds). Indeed, according to some economists, there is no good reason to expect a positive maturity premium, given that for some investors short-term bonds may be riskier than longer-term ones, while for others the opposite may be true . For example, for investors with a long time horizon and long-term liabilities, bonds with a distant maturity in time are the least risky investment (think of a zero coupon bond, i.e. without coupons, which matures when needed of the money invested, thus achieving a perfect match between the investment strategy and the objective to be achieved).
For these investors, long-term investment in T-Bills (our BOTs) in fact presents the so-called reinvestment risk, given that the future rate of the bonds that will be purchased is uncertain. On the other hand, for investors with a short time horizon, long-term bonds are risky, given the risk of an increase in the interest rate and the consequent uncertainty about the future sale price.
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