Bond Outlook October 5th

For five months we have recommended a barbell for USD fixed-income. However, the time has come to discontinue the long end as the risk grows of its yield rising.

Bond Outlook [by bridport & cie, October 5^th 2005]

For many weeks we have been struggling with the likely development of the US yield curve, and consequently with our recommendation for maturities for USD fixed-income portfolios. Since the end of April 2005, our recommendation has been to “barbell” between floaters and 10 year maturities. This has proven a sound strategy, but, as regular readers will have noted, we have become increasingly uneasy about how long the strategy can remain appropriate.